SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrantx
Filed by a Party other than the Registrant¨
Check the appropriate box:
| x | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
First Financial Bancorp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing fee (Check the appropriate box)
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) | Title of each class of securities to which transaction applies: |
| 2) | Aggregate number of securities to which transaction applies: |
| 3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) | Proposed maximum aggregate value of transaction: |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 24, 2011
Cincinnati, Ohio
April __, 2011
To the Shareholders:
The Annual Meeting of Shareholders of First Financial Bancorp. (the “Company”) will be held at the First Financial CorporationCenter at 201255 E. FourthFifth Street, 209th Floor, Room 950, Cincinnati, OH 45202 on Tuesday, May 24, 2011,27, 2014, at 1010:00 a.m., local time, for the following purposes:
| 1. | To approve an amendment to Article FOURTH of the Company’s Articles of Incorporation to increase the number of preferred shares authorized to be issued by the Company from 80,000 to 10,000,000 and to authorize the directors to establish the terms of such preferred shares; |
| 2. | To elect the following |
| 3. |
| 4. | To obtain an advisory (non-binding) vote on the compensation of the Company’s executive officers; |
| 5. |
| 6. |
Important noticeNotice regarding the availability of Proxy Materials for the Annual Meeting of Shareholders:
The proxy statement and 20102013 Annual Report are available at:at www.bankatfirst.com/Investor
Shareholders of record of the Company at the close of business on March 28, 2010,April 2, 2014, are entitled to notice of and to vote at the Annual Meeting and at any adjournment thereof. Each shareholder is entitled to one vote for each common share held regarding each matter properly brought before the Annual Meeting.
For instructions on voting, please refer to the instructions on theNotice of Internet Availability of Proxy Materials you received in the mail or, if you received a hard copy of the Proxy Statement, on your enclosed proxy card. You may receive proxy materials by mail or e-mail if you request them and you continue to have the right to vote by mail as well as by telephone and on the internet.
Your vote is important.Whether or not you expect to attend the annual meeting, it is important that your shares be represented and voted at the meeting. Your Board of Directors unanimously recommends that you vote:
“FOR”
the approval of the amendment to Article FOURTH of the Company’s Articles of Incorporation;“FOR” the election of each of the Directordirector nominees listed in this proxy statement;
“FOR”
“FOR”
the non-binding resolution regarding executive compensation; and“FOR”
the| By Order of the Board of Directors, | |
 Anthony M. Stollings Secretary |
TABLE OF CONTENTS
255 E. FourthFifth Street, Suite 2000
Cincinnati, Ohio 45202
877-322-9530
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Approximate Date to Mail – April 13, 2011
We are sending this Proxy Statementproxy statement and the accompanying proxy card to you as a shareholder of First Financial Bancorp., an Ohio corporation, (“First Financial”), in connection with the solicitation of proxies for the Annual Meeting of Shareholders (the “Annual Meeting”) to be held at the company’sCompany’s headquarters: 201 E, FourthFirst Financial Center, 255 E. Fifth Street, 209th Floor, Room 950, Cincinnati, Ohio 45202, on Tuesday, May 24, 2011,27, 2014, at 10:00 a.m., local time. First Financial’s Board of Directors is soliciting proxies for use at the Annual Meeting, or at any postponement or adjournment thereof. Only shareholders of record as of the close of business on March 28, 2011,April 2, 2014, which we refer to as the record date, will be entitled to vote at the Annual Meeting.
In this proxy statement, the “Company,” “First Financial,” First Financial Bancorp,” “we,” “our,”“our” or “us” all refer to the company named First Financial BancorpBancorp. and its subsidiaries. We also refer to the Board of Directors of First Financial Bancorp as the “board”“Board.” References in this proxy statement to “common shares” or “shares” refer to the “Board.”
What matters will be voted upon at the Annual Meeting?
Assuming a quorum is present, the following proposals will be voted on at the| · | Approval of an amendment to Article FOURTH of the Company’s Articles of Incorporation to increase the number of preferred shares authorized to be issued by the Company from 80,000 to 10,000,000 and to authorize the directors to establish the terms of such preferred shares (Proposal 1); | |
| · | Election of the following |
| · | Ratification of |
| · | Obtaining an advisory (non-binding) vote on the compensation of the Company’s executive |
| · | Approving the |
| · |
Why did I receive a Notice of Internet Availability of Proxy Materials instead of paper copies of the proxy materials? The Securities and Exchange Commission’s (“SEC”) notice and access rule allows us to furnish our proxy materials over the Internet to our shareholders instead of mailing paper copies of those materials to each shareholder. As a result, on or before April __, 2014 we sent to most of our shareholders by mail or e-mail a notice containing instructions on how to access our proxy materials over the internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received only a notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions in the notice or on the website referred to in the notice.
We are providing some of our shareholders, including shareholders who have previously asked to receive paper copies of the proxy materials, shareholders who are participants in our benefit plans and shareholders holding 1,000 or more common shares paper copies of the proxy materials instead of a notice that the materials are electronically available over the internet.
What does the Notice of Internet Availability of Proxy Materials look like?You will receive a document titled “Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 27, 2014” from Broadridge Financial Solutions containing instructions on how to access the proxy statement and the Company’s 2013 Annual Report to Shareholders (the “Annual Report”) via the Internet and how to vote online (www.proxyvote.com). If you would like to receive a printed or electronic copy of the proxy materials, free of charge, you should follow the instructions for requesting such materials included in such notice and on the website (www.proxyvote.com).
Who can vote?
You are entitled to vote if you held First Financial common shares as of the close of business onEach shareholder is entitled to one vote for each common share held on March 28, 2011.April 2, 2014. At the close of business on March 28, 2011,April 2, 2014, there were 58,050,778[______________] common shares outstanding and entitled to vote. The common shares are First Financial’sthe Company’s only voting securities entitled to vote at the meeting.
Regardless of the number of shares you own, it is important that you vote on the proposals.
How do I vote?
Your common shares may be voted by one of the following methods:| § | by traditional proxy card via the U.S. Mail; |
| § | by submitting a proxy via the Internet; |
| § | by submitting a proxy by |
| § | in person at the |
Submitting a Proxy by Telephone or via the Internet
. If you are a shareholder of recordIf your common shares are registered in the name of a broker, a financial institution or another nominee (i.e., you hold your common shares in “street name”), your nominee may be participating in a program that allows you to submit a proxy by telephone or via the Internet. If so, the voting form your nominee sent you will provide instructions for submitting your proxy by telephone or via the Internet.
The last-dated proxy you submit (by any means) will revoke and supersede any previously-submittedpreviously submitted proxy. Also, if you submit a proxy by telephone or via the Internet, and later decide to attend the Annual Meeting, you may revoke your previously submitted proxy and vote in person at the Annual Meeting.
The deadline for submitting a proxy by telephone or via the Internet as a shareholder of record is 11:59 p.m. Eastern Time on May 23, 2011.26, 2014. For shareholders whose common shares are registered in the name of a broker, a financial institution or another nominee, please consult the instructions provided by your nominee for information about the deadline for submitting a proxy by telephone or via the Internet.
Voting in Person.
If you attend the Annual Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the Annual Meeting.If you hold your common shares in “street name” through a broker, a financial institution or another nominee, then that nominee is considered the shareholder of record for voting purposes and should give you instructions for voting your common shares. As a beneficial owner, you have the right to direct that nominee how to vote the common shares held in your account. Your nominee may only vote the common shares of First Financial that it holds for you in accordance with your instructions. If you have instructed a broker, a financial institution or another nominee to vote your common shares, the above-described options for revoking your proxy do not apply and instead you must follow the instructions provided by your nominee to change your vote.
If you hold your common shares in “street name” and wish to attend the Annual Meeting and vote in person, you must bring an account statement or letter from your broker, financial institution or other nominee authorizing you to vote on behalf of such nominee. The account statement or letter must show that you were the direct or indirect beneficial owner of the common shares on March 28, 2011,April 2, 2014, the record date for voting at the Annual Meeting.
How will my common shares be voted?
Those common shares represented by properly executed proxy cards that are received prior to the Annual Meeting or by properly authenticated Internet or telephone votes that are submitted prior to the deadline for doing so, and not subsequently revoked, will be voted in accordance with your instructions by your proxy. If you submit a valid proxy card prior to the Annual Meeting, or timely submit your proxy by telephone or via the Internet, but do not complete the voting instructions, your proxy will vote your common shares as recommended by the Board,| § | “ number of preferred shares authorized to be issued by the Company from 80,000 to 10,000,000 and to authorize the directors to establish the terms of the preferred shares; |
| § | “ |
| § | “ |
| § | “ |
| § | “ |
If you hold your shares in a bank or brokerage account, you should be aware that if you fail to instruct your bank or broker how to vote within 10ten days of the Annual Meeting, the bank or broker is not permitted to vote your shares in its discretion on your behalf on non-routine items. If you want to assure that your shares are voted in accordance with your wishes on the non-routine matters in this proxy statement (i.e. everything other than the ratification of Ernst & Young), you should complete and return your voting instruction form before May 23, 2011.
No appraisal rights exist for any action proposed to be taken at the Annual Meeting. If any other matters are properly presented for voting at the Annual Meeting, the persons named as proxies will vote on those matters, to the extent permitted by applicable law, in accordance with their best judgment.
What if my common shares are held through the First Financial Bancorp 401(k) Savings Plan?
If you participate in the First Financial Bancorp 401(k) Savings Plan (the “401(k) Plan”) and common shares have been allocated to your account,Can the proxy materials be accessed electronically?
We are sending the proxy materials for the Annual Meeting to our shareholders on or about AprilHow do I change or revoke my proxy?
Shareholders who submit proxies retain the right to revoke them at any time before they are exercised. Unless revoked, the common shares represented by such proxies will be voted at the Annual Meeting and any adjournment thereof. You may revoke your proxy at any time before it is actually exercised at the Annual Meeting by giving notice of revocation to First Financial in writing, by accessing the Internet site prior to the deadline for submitting proxies electronically, by using the toll-free telephone number stated on the proxy card prior to the deadline for transmitting proxies electronically or by attending the Annual Meeting and giving notice of revocation in person. The last-dated proxy you submit (by any means) will revoke and supersede any previously-submitted proxy. If you hold your common shares in “street name” and instructed your broker, financial institution or other nominee to vote your common shares and you would like to revoke or change your vote,If I vote in advance, can I still attend the Annual Meeting?
Yes. You are encouraged to voteWhat constitutes a quorum and how many votes are required for adoption of the proposals?
Under First Financial’s Regulations, a quorum is a majority of the common shares outstanding. Common shares may be present in person or represented by proxy at the Annual Meeting. Both abstentions and broker non-votes are counted as being present for purposes of determining the presence of a quorum. There wereIf a broker indicates on the form of proxy that it does not have discretionary authority as to certain common shares to vote on a particular matter, those common shares will be considered as present for the purpose of determining the presence of a quorum but not entitled to vote with respect to that matter. Although our common shares are listed on the NASDAQ Stock Market (“NASDAQ”), New York Stock Exchange (“NYSE”) rules determine whether proposals presented at shareholder meetings are routine or not routine. If a proposal is routine, a broker or other entity holding shares for an owner in street name“street name” may vote on the proposal without receivingif it does not receive voting instructions from the owner. If a proposal is not routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. A broker non-vote occurs when the broker or other entity is unable to vote on a proposal because the proposal is not routine and the owner does not provide any instructions. TheAs indicated below, the proposed amendment to our Articles of Incorporation, the election of directors and the shareholder proposalnon-binding vote on executive compensation are non-routine items.
Under NYSE rules, each proposal, other than Proposal 3
With respect to Proposal 1, the affirmative vote of two-thirds of the outstanding common shares is required to amend the Articles. The election of directors (Proposal 2) requires the affirmative vote of a plurality of the common shares present, represented, and entitled to vote at the Annual Meeting. However, we have adopted certain requirements in the event a nominee receives a greater number of “withhold” votes than “for” votes. See “Corporate Governance – Policy on Majority Voting.” With respect to Proposals 3, 4 and 5, a majority of the common shares validly cast on the proposal will be required to approve the proposals,proposals.
An abstention will be counted as present for the following proportionpurposes of votes is required:
It is our policy to keep confidential all proxy cards, ballots and voting tabulations that identify individual shareholders. However, exceptions to this policy may be necessary in some instances to comply with legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting. Inspectors of election and any employees associated with processing proxy cards or ballots and tabulating the vote must acknowledge their responsibility to comply with this policy of confidentiality.
Who pays the cost of proxy solicitation?
We will pay the costs of preparing, assembling, printing and mailing thisWho should I call if I have questions concerning this proxy solicitation or the proposals to be considered at the Annual Meeting?
If you have any questions concerning the proposals to be considered at the Annual Meeting or voting your shares or if you need directions to the Annual Meeting, please call our investor relations department atDoes First Financial send multiple proxy statements to two or more registered shareholders who share an address?
Only one copy of thisRegistered shareholders who share an address and would like to receive a separate Proxy Statementproxy statement for the Annual Meeting may contact First Financial Bancorp Investor Relationsour investor relations department to request a copy. Call 513-979-5837,877-322-9530 or send a written request to: Kenneth J. Lovik, Investor Relations & Corporate Development, First Financial Bancorp, 201255 E. FourthFifth Street, Suite 1900,700, Cincinnati, Ohio 45202.
Are there any rules regarding admission to the annual meeting?
The table below identifies all persons known to us to own beneficially more than 5% of our outstanding common shares as of the voting record date.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Shares | Percentage of Class | ||||||
First Financial Bank, National Association 300 High Street Hamilton, Ohio 45012-0476 | 3,090,344 | (1) | 5.32 | % | ||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 4,488,451 | (2) | 7.73 | % | ||||
Lord, Abbett & Co. LLC 90 Hudson Street Jersey City, NJ 07302 | 4.617,429 | (3) | 7.95 | % | ||||
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Shares | Percentage of Class | ||||||
| BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 5,223,444 | (1) | 9.10 | % | ||||
| The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 3,479,050 | (2) | 6.03 | % | ||||
| Westwood Management Corp. 200 Crescent Court, Suite 1200 Dallas, TX 75201 | 3,409,158 | (3) | 5.92 | % | ||||
| (1) | Information based upon a Schedule 13G/A filed on |
| (2) | Information based on a Schedule 13G/A filed on February 12, 2014. Vanguard has sole power to vote for 84,671 shares; sole dispositive power for |
| Information based upon a Schedule 13G/A filed on February |
SHAREHOLDINGS OF DIRECTORS, EXECUTIVE OFFICERS
As of March 28, 2011,April 2, 2014, the directors of the Company, including the fiveeleven nominees for election as directors, the executive officers of the Company named in the Summary Compensation Table who are not also directors, and all executive officers and directors of the Company as a group beneficially owned common shares of the Company as set forth below.
| Amount and Nature of Beneficial Ownership | |||||||||||||||
| Name | Position | Common Shares Beneficially Owned Excluding Options (1) | Stock Options Exercisable within 60 Days of Record Date (2) | Total Common Shares Beneficially Owned (1) | |||||||||||
| J. Wickliffe Ach | Director | 9,617 | (3) | — | 9,617 | ||||||||||
| David S. Barker | Director | 3,577 | (4) | — | 3,577 | ||||||||||
| Cynthia O. Booth | Director | 60 | — | 60 | |||||||||||
| Donald M. Cisle, Sr. | Director | 175,248 | (3) | 17,326 | 192,574 | ||||||||||
| Mark A. Collar | Director | 8,930 | (5) | — | 8,930 | ||||||||||
| Claude E. Davis | Director, President & CEO | 220,433 | (7) | 584,899 | 805,332 | ||||||||||
| Corinne R. Finnerty | Director | 38,958 | (3) | 17,326 | 56,284 | ||||||||||
| Murph Knapke | Director | 62,590 | (5) | — | 62,590 | ||||||||||
| Susan L. Knust | Director | 20,098 | (6) | 8,663 | 28,761 | ||||||||||
| William J. Kramer | Director | 24,172 | (5) | 8,663 | 32,835 | ||||||||||
| Richard E. Olszewski | Director | 27,568 | (3) | 8,663 | 36,231 | ||||||||||
| Maribeth S. Rahe | Director | 5,821 | (4) | — | 5,821 | ||||||||||
| J. Franklin Hall | EVP & CFO | 54,218 | (7) | 107,674 | 161,892 | ||||||||||
| C. Douglas Lefferson | EVP & Chief Banking Officer | 78,769 | (7) | 155,199 | 233,968 | ||||||||||
| Samuel J. Munafo | EVP, Chief Commercial Lending Officer | 74,519 | (7) | 99,674 | 174,193 | ||||||||||
| Gregory A. Gehlmann | EVP & Gen Counsel | 47,739 | (7) | 86,874 | 134,613 | ||||||||||
| All executive officers, directors and nominees as a group (18 persons) | 894,609 | 1,191,384 | 2,085993 | ||||||||||||
| Amount and Nature of Beneficial Ownership | ||||||||||||||
| Name | Position | Common Shares Beneficially Owned Excluding Options (1) | Stock Options Exercisable within 60 Days of Record Date (2) | Total Common Shares Beneficially Owned (1) | ||||||||||
| J. Wickliffe Ach | Director & Nominee | |||||||||||||
| David S. Barker | Director & Nominee | |||||||||||||
| Cynthia O. Booth | Director & Nominee | |||||||||||||
| Donald M. Cisle, Sr. – not a nominee in 2014 | Director | |||||||||||||
| Mark A. Collar | Director & Nominee | |||||||||||||
| Claude E. Davis | Director, Nominee, President & CEO | |||||||||||||
| Corinne R. Finnerty | Director & Nominee | |||||||||||||
| Murph Knapke | Director & Nominee | |||||||||||||
| Susan L. Knust | Director & Nominee | |||||||||||||
| William J. Kramer | Director & Nominee | |||||||||||||
| Richard E. Olszewski | Director & Nominee | |||||||||||||
| Maribeth S. Rahe | Director & Nominee | |||||||||||||
| Anthony M. Stollings | EVP, Chief Financial Officer and Chief Administrative Officer (6) | |||||||||||||
| Richard S. Barbercheck | EVP and Chief Credit Officer (6) | |||||||||||||
| Kevin T. Langford | President, Consumer Banking; President, Western Markets | |||||||||||||
| C. Douglas Lefferson | President, Commercial Banking and Wealth Mgt; President, Eastern Markets | |||||||||||||
| J. Franklin Hall | Former Chief Financial Officer (6) | |||||||||||||
| All executive officers, directors and nominees as a group (20 persons) | ||||||||||||||
| (1) | Includes shares held in the name of spouses, minor children, trusts and estates as to which beneficial ownership may be disclaimed. |
| (2) |
| (3) |
| (4) |
| (5) |
| Includes unvested restricted shares |
| (6) | J. Franklin Hall served as Chief Financial Officer of the Company through January 17, 2013. Stock ownership information for Mr. Hall is based on Company records as of March 1, 2013 as Mr. Hall is no longer subject to the reporting requirements of the SEC. Effective January 18, 2013, Anthony M. Stollings, Executive Vice President and Chief Risk Officer of the Company, became Executive Vice President and Chief Financial Officer of the Company. Effective August 20, 2013, Mr. Stollings added the title of Chief Administrative Officer. Mr. Barbercheck became Executive Vice President and Chief Credit Officer on June 1, 2010. |
PROPOSAL 1 — amendment to the Company's Articles of Incorporation to increase the number of preferred shares authorized to be issued
by the Company from 80,000 to 10,000,000 AND TO AUTHORIZE THE
DIRECTORS TO ESTABLISH THE TERMS OF THE PREFERRED SHARES
General
Article FOURTH of our Articles of Incorporation (“Articles”) currently provides that the Board may designate and issue up to 80,000 preferred shares, no par value (“Preferred Shares”), pursuant to the terms of any capital purchase program(s) authorized by the Emergency Economic Stabilization Act of 2008 (“EESA”) implemented by the United States Department of the Treasury (the “Treasury”). On December 23, 2008, as part of the Treasury’s Troubled Asset Relief Program Capital Purchase Program (“CPP”), the Company issued and sold to the Treasury 80,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share (the “Series A Preferred Stock”). During February 2010, the Company completed a follow-on offering of common shares and, after deducting underwriting and other offering costs, received net proceeds of $91.2 million. On February 24, 2010, the Company used most of the net proceeds to redeem all of the $80.0 million of Series A Preferred Stock issued to the Treasury under the CPP. There are currently no Preferred Shares in any form issued or outstanding.
In connection with the Company’s participation in the CPP, the Treasury also received warrants for the purchase of an aggregate of 930,233 common shares at a strike price of $12.90 per share which expire on December 23, 2018 (the “Treasury Warrants”). As a result of a common share follow-on offering during the second quarter of 2009, the aggregate number of common shares eligible for purchase under the Treasury Warrants was reduced by 50% to 465,117 shares. In June 2010, the Treasury conducted an auction of the Treasury Warrants in which the Treasury Warrants were sold in a public offering at a price of $6.70 per warrant. This transaction represented the final step in the redemption process and the Treasury no longer owns any securities issued by the Company.
However, due to the terms of the Preferred Shares under the Company’s Articles, no additional authorized Preferred Shares are available for future issuance by the Company.
The proposed amendment to Article FOURTH (the “Proposed Amendment”) would increase the authorized number of Preferred Shares from 80,000 shares to 10,000,000shares and further permit the Company’s Board the flexibility to determine the designations, terms, relative rights, preferences, privileges and limitations of the Preferred Shares without the restriction that any such issuance occur pursuant to the terms of a capital purchase program authorized by the EESA. The newly authorized Preferred Shares would be “de-clawed blank check” Preferred Shares, meaning the Preferred Shares will be available for issuance without further action by the shareholders, except as may be required by applicable laws or rules, but will have limited voting rights and will not be used specifically for anti-takeover purposes.
A copy of the Proposed Amendment, which includes the text of Article FOURTH as it is proposed to be amended, is attached as Appendix A to this Proxy Statement and incorporated by reference to this proposal. If the Proposed Amendment is approved by shareholders, the Proposed Amendment will become effective upon filing with the Ohio Secretary of State, which we intend to do promptly following such approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSED AMENDMENT TO OUR ARTICLES OF INCORPORATION.
| 10 |
Reasons for the Proposed Amendment; Purposes of the Preferred Shares
Issuance of preferred stock by banking and financial institutions has increased significantly since 2012. Under Basel III and U.S. regulatory capital rules applicable to us beginning January 1, 2015, preferred stock is inclusive in Tier 1 capital up to 1.5% of risk-weighted assets assuming the securities contain certain qualifying criteria, including a non-cumulative dividend, no maturity date, and a no-call option for the issuer for a minimum period of five years following issuance. Preferred stock issued in excess of 1.5% of risk-weighted assets would qualify as Tier 2 capital and thus be included in total capital.The Proposed Amendment to Article FOURTH would provide us with additional flexibility to create one or more future series of Preferred Shares. Although the Board has no immediate plans to issue Preferred Shares, it believes that the increase in the number of authorized Preferred Shares is advisable for several reasons. First, the authorization of Preferred Shares will allow us to manage our capital structure in a manner consistent with other publicly-traded banking organizations and increase our flexibility in structuring capital raising transactions, future acquisitions, joint ventures, strategic alliances or for other corporate purposes as approved by the Board. Second, Preferred Shares may also be useful in connection with stock dividends, equity compensation plans or other proper corporate actions.
If the Amendment to Article FOURTH is approved by our shareholders, the Company will be able to issue, without further shareholder action, Preferred Shares in one or more series at such times and for such consideration as the Board may determine is in the best interests of the Company and its shareholders. The availability of Preferred Shares would enable us to respond promptly to, and take advantage of, market conditions and other favorable opportunities without incurring the delay and expense associated with calling a special meeting of shareholders to approve a contemplated issuance of such shares. The Board believes that such enhanced ability to respond to opportunities and to favorable capital market conditions before the opportunity or conditions pass is in the best interests of our Company and its shareholders.
The failure to approve the Proposed Amendment could limit us in connection with future capital raising transactions or other strategic transactions if such transactions require us to issue Preferred Shares. If our shareholders do not approve the Proposed Amendment, it limits our ability to compete in the market place and enhance shareholder value through acquisitions and other strategic transactions. In such cases, we may lose opportunities due to the time delay and uncertainty of needing to hold a special meeting of shareholders in order to proceed with such transactions.
Description of the Preferred Shares
Subject to the limitations described below, the Preferred Shares would have such voting rights, designations, preferences, qualifications, limitations or restrictions and relative, participating, option and conversion or other special rights as the Board may designate for each class or series issued from time to time.
The Preferred Shares to be authorized are commonly referred to as “de-clawed blank check” preferred shares in that:
| · | the voting rights of each Preferred Share are limited to no more than one vote per share, and the Preferred Shares will not vote as a separate class or series except as required by Ohio law; and |
| · | the Board represents that it will not issue, without prior shareholder approval, any series of the Preferred Shares for any defensive or anti-takeover purpose, for the purpose of implementing a shareholder rights plan, or with features specifically intended to make any attempted acquisition of the Company more difficult or costly. |
However, within these limits, the Board may issue Preferred Shares for capital raising transactions, future acquisitions, joint ventures, strategic alliances or for other corporate purposes as approved by the Board. The Board believes that authorization of Preferred Shares with the above limitations is consistent with sound corporate governance principles while enhancing the Company’s ability to take advantage of financing alternatives and acquisition opportunities.
The Board is also authorized to increase or decrease the number of shares of any series of Preferred Shares prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of Preferred Shares of any series is so decreased, the shares constituting such decrease will resume the status of authorized but unissued shares.
The Preferred Shares would be available for issuance without further action by the shareholders, except as may be required by applicable laws or rules. For example, under NASDAQ rules, shareholder approval is required for any potential issuance of 20% or more of our outstanding common shares (including upon conversion of convertible preferred stock) in connection with issuances not involving a public offering.
Effect of the Preferred Shares Upon Holders of Common Shares
The actual effect of the issuance of any series of Preferred Shares upon the rights of holders of our common shares cannot be stated until the Board determines the specific rights of the holders of such Preferred Shares. The Board will have authority to, among other things; establish the number of shares constituting a series, dividend rights, voting rights (but limited to no more than one vote per Preferred Share), conversion or exchange privileges, redemption features, sinking fund provisions, and rights in the event of a voluntary or involuntary liquidation or dissolution.
The effects of the issuance of Preferred Shares upon holders of our common shares might include, among other things:
| · | restricting our ability to declare dividends or the amount of such dividends on common shares; |
| · | restricting our ability to repurchase outstanding common shares; |
| · | diluting the voting power of common shares, although the Preferred Shares may not havemore than one vote per share; and |
| · | a change in the market price of the common shares, or impairing the liquidation rights of the commonshares, without further action by the shareholders. |
Effect of the Proposed Amendment
The Proposed Amendment would:
| · | authorize us to issue up to 10,000,000 Preferred Shares; and |
| · | subject to the Ohio Revised Code and the other provisions of the Articles, authorize the Board to issue newly authorized Preferred Shares from time to time in the future, to create separate series of Preferred Shares within the new class, and to determine the number of shares, designations, terms, relative rights, preferences and limitations of the Preferred Shares, or of shares within each series of Preferred Shares, at the time of issuance, all by resolution and without any further shareholder approval. |
If the Proposed Amendment is approved, then, in general, any Preferred Share issued would likely have certain preferences over, or special terms that differ from, outstanding common shares. Among other things, those preferences and special terms might include:
| · | the right to receive dividends (which may be cumulative or noncumulative) at a stated rate before any dividend could be paid on our common shares; |
| · | the right to receive a stated distribution upon any liquidation of the Corporation before any distribution could be made to holders of our common shares; |
| · | terms providing for the conversion of Preferred Shares into our common shares, either automatically or at the option of the holders of such shares, at specified rates; and |
| · | terms providing for the redemption of Preferred Shares, either at our option or at the option of holders of the Preferred Shares, or both, or upon the happening of a specified event, and, if the Preferred Shares are redeemable, the redemption prices and the conditions and times upon which redemption may take place. |
Issuing Preferred Shares with voting rights would dilute the relative voting power of the current holders of common shares. The then current shareholders would not have preemptive rights to acquire any additional shares of common stock issued by the Company and would have no right to purchase a proportionate share, or any portion, of any Preferred Share issued.
If the Proposed Amendment is approved by the shareholders, Preferred Shares could be issued in the future from time to time, in one or more series, in a variety of types of transactions, including public offerings or private sales of Preferred Shares to increase our capital or as consideration for acquisitions. At the time each series of Preferred Shares is established, the Board would determine the number of Preferred Shares in that series and the terms, relative rights, preferences and limitations of Preferred Shares within that series, which could differ materially from other series.
Anti-Takeover Effects of the Proposed Amendment
The purpose of the Proposed Amendment is to provide the Board with an additional option for expanding our ability to raise capital, not to establish any barriers to a change of control or acquisition of the Company. Subject to the exercise of its fiduciary duties to the Company and its shareholders, the Board will not issue any Preferred Shares for any defensive or anti-takeover purpose or with features intended specifically to make any attempted acquisition of the Company more difficult. Instead, the Board intends to issue Preferred Shares only for the purpose of facilitating acquisitions, joint ventures, strategic alliances and capital-raising transactions, and for other corporate purposes which the Board determines to be in the best interests of the Company and its shareholders. The issuance of Preferred Shares in connection with these purposes, including the ability to determine the terms and preferences of each series, could nonetheless have the effect of making an acquisition of the Company more difficult.
For example, the issuance to a group that is friendly to the Company’s management of shares of a series of Preferred Shares having preferential terms could deter or discourage efforts by another group or company to acquire control of the Company, even if other shareholders favored a change of control. The Proposed Amendment is not being recommended in response to any specific effort of which we are aware to obtain control of the Company, nor does the Board have any present intent to use the Preferred Shares to impede a takeover attempt.
Anti-Takeover Effects of Certain Provisions of our Articles of Incorporation and Ohio Law
Our Articles contain certain provisions that make it more difficult to acquire control of us by means of a tender offer, open market purchase, a proxy fight or otherwise. These provisions are designed to encourage persons seeking to acquire control of us to negotiate with our Board. We believe that, as a general rule, the interests of our shareholders would be best served if any change in control results from negotiations with our Board. The following provisions of the Articles and Ohio law might have the effect of delaying, deferring or preventing a change in control of us and would operate only with respect to an extraordinary corporate transaction, such as a merger, reorganization, tender offer, sale or transfer of assets or liquidation involving the Company and certain persons described below.
The Ohio General Corporation Law provides that the approval of two-thirds of the voting power of a corporation is required to effect mergers and similar transactions, to adopt amendments to the articles of incorporation of a corporation and to take certain other significant actions. Although under Ohio law the articles of incorporation of a corporation may permit such actions to be taken by a vote that is less than two-thirds (but not less than a majority), our Articles do not contain such a provision. The two-thirds voting requirement tends to make approval of such matters, including further amendments to the Articles, relatively difficult, and a vote of the holders of in excess of one-third of our outstanding common shares would be sufficient to prevent implementation of any of the corporate actions mentioned above.
Ohio Revised Code Section 1701.831 is a “control share acquisition” statute. The control share acquisition statute basically provides that any person acquiring shares of an “issuing public corporation” (which definition we meet) in any of the following three ownership ranges must seek and obtain shareholder approval of the acquisition transaction that first puts such ownership within each such range: (i) more than 20% but less than 33 1/3%; (ii) 33 1/3% but not more than 50%; and (iii) more than 50%.
The purpose of the control share acquisition statute is to give shareholders of Ohio corporations a reasonable opportunity to express their views on a proposed shift in control, thereby reducing the coercion inherent in an unfriendly takeover. The provisions of the control share acquisition statute grant to our shareholders the assurance that they will have adequate time to evaluate the proposal of the acquiring person, that they will be permitted to vote on the issue of authorizing the acquiring person’s purchase in the same manner and with the same proxy information that would be available to them if a proposed merger of the Company were before them and, most importantly, that the interests of all shareholders will be taken into account in connection with such vote and the probability will be increased that they will be treated equally regarding the price to be offered for their common shares if the purchase is approved.
The control share acquisition statute applies not only to traditional offers but also to open market purchases, privately negotiated transactions and original issuances by an Ohio corporation, whether friendly or unfriendly. The procedural requirements of the control share acquisition statute could render approval of any control share acquisition difficult because it must be authorized at a special meeting of shareholders, at which a quorum is present, by the affirmative vote of the majority of the voting power represented and by a majority of the portion of such voting power, excluding interested shares. Any corporate defense against persons seeking to acquire control may have the effect of discouraging or preventing offers which some shareholders might find financially attractive. On the other hand, the need on the part of the acquiring person to convince our shareholders of the value and validity of the offer may cause such offer to be more financially attractive in order to gain shareholder approval.
Ohio Revised Code Chapter 1704 is a “merger moratorium” statute. The merger moratorium statute provides that, unless a corporation’s articles of incorporation or regulations otherwise provide, an “issuing public corporation” (which definition we meet) may not engage in a “Chapter 1704 transaction” for three years following the date on which a person acquires more than 10% of the voting power in the election of directors of the issuing corporation, unless the Chapter 1704 transaction is approved by the corporation’s Board of Directors prior to such transaction. A person who acquires such voting power is an “interested shareholder,” and “Chapter 1704 transactions” involve a broad range of transactions, including mergers, consolidations, combinations, liquidations, recapitalizations and other transactions between an issuing public corporation and an interested shareholder if such transactions involve 5% of the assets or shares of the issuing public corporation or 10% of its earning power. After the initial three year moratorium, Chapter 1704 prohibits such transactions absent approval by disinterested shareholders or the transaction meeting certain statutorily defined fair price provisions. One significant effect of Chapter 1704 is to encourage a person to negotiate with a corporation’s board of directors prior to becoming an interested shareholder.
Ohio also has enacted Ohio Revised Code Section 1707.043, which provides that a person who announces a control bid must disgorge profits realized by that person upon the sale of any equity securities within 18 months of the announcement.
In addition, Section 1701.59 of the Ohio Revised Code provides that, in determining what a director reasonably believes to be in the best interests of the corporation, such director may consider, in addition to the interests of the corporation’s shareholders, any of the interests of the corporation’s employees, suppliers, creditors and customers, the economy of the State of Ohio and the United States, community and societal considerations and the long-term as well as the short-term interests in the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.
The overall effect of these statutes may be to render more difficult or discourage the removal of incumbent management or the assumption of effective control by other persons.
Required Vote for Approval
The affirmative vote of the holders of common shares entitling them to exercise two-thirds of the voting power of the Company’s outstanding common shares is necessary to adopt the Proposed Amendment. Validly executed proxies will be voted in favor of the Proposed Amendment unless otherwise instructed by you. Abstentions and shares not voted by brokers and other entities holding shares on behalf of the beneficial owners will have the same effect as votes cast against the Proposed Amendment.
Effectiveness of the Proposed Amendment
If shareholders approve the Proposed Amendment, we will file an amendment to the Articles with the Ohio Secretary of State as soon as practicable following the Annual Meeting. The Proposed Amendment would become effective at the time of filing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TOincrease the number of preferred shares authorized to be issued by the Company from 80,000 to 10,000,000 and to authorize the directors to establish the terms of such preferred shares.
Our Board of Directors currently consists of twelve members, eleven of whom are non-employee directors. Our Regulations provide that the Board of Directors shall consist of not less than 9nine or more than 25 persons, with the exact number to be fixed and determined from time to time by resolution of the Board of Directors or by resolution of the shareholders at any annual or special meeting of shareholders. Any vacancy may be filled by the Board of Directors in accordance with law and the Company’s Regulations for the remainder of the full term of the vacant directorship. However, pursuant toAs the company’s corporate governance principles, any new director appointed to fill aBoard has only approved eleven nominees as candidates for election at the Annual Meeting, one vacancy will exist on the Board immediately following the Annual Meeting. The accompanying proxy will not be put up for electionvoted to fill the remaining termelect more than eleven directors at the next meetingAnnual Meeting or any adjournment of shareholders after his/her appointment.
Our Board has approved the nomination of foureleven persons as candidates for Class I Directors,election as director, each for a three-year term; and one person as a candidate for Class II Director for a one-year term. In the event the shareholders approve amendments to the Company’s articles of incorporation and regulations, all nominees will be elected to one-year terms. The terms of the remaining directors in Classes I and II will continue as indicated below. It is intended that the accompanying Proxyproxy will be voted for the election of J. Wickliffe Ach, David S. Barker, Cynthia O. Booth, Mark A. Collar, Claude E. Davis, Corinne R. Finnerty, Murph Knapke, Susan L. Knust, William J. Kramer, Richard E. Olszewski, and Maribeth S. Rahe, all of whom are incumbent directors. The CGNCCorporate Governance and Nominating Committee (“CGNC”) recommended all fiveeleven nominees to the Board, of Directors, which approved the fiveeleven nominees. In the event that any one or more of such nominees becomes unavailable or unable to serve as a candidate, the accompanying Proxyproxy will be voted to elect the remaining nominees and any substitute nominee or nominees designated by the Board. The foureleven nominees for Class I Directors and one nominee for Class II Directordirector receiving the most votes at the Annual Meeting will be elected as Class I and Class Directors, respectively.directors. See however, “Corporate Governance - Policy on Majority Voting.”
Set forth below is certain information concerning the Company’s nominees and directors. For information regarding ownership of shares of the Company by nominees and directors of the Company, see “Shareholdings of Directors, Executive Officers and Nominees for Director” above. There are no arrangements or understandings between any director or any nominee, and any other person pursuant to which such director or nominee is or was nominated to serve as director.
| Name and Age (1) | Position with Company and/or Principal Occupation or Employment For the Last Five Years | Director Since | ||
Nominees for One Year Term: | ||||
J. Wickliffe Ach 65 | President and CEO, Hixson Inc., Cincinnati, Ohio, an architectural engineering firm, since 1983. Board member: Hixson, Inc. (Chair) and Setzer Corp. Mr. Ach is involved in a number of business and civic organizations, including the recently completed World Choir Games, Work Resource Center/Easter Seals, Crayons to Computers (free store for teachers), Chief Executives and World Presidents Organizations and Hamilton County Development Co. Mr. Ach is Vice Chair of the Company’s Board. Director of First Financial Bank, N.A., Hamilton, Ohio since 2007.
| 2007 | ||
David S. Barker 60 | President and Chief Executive Officer, SIHO Insurance Services, Columbus, Indiana, a community health care benefits company serving over 110,000 members throughout southern Indiana. Mr. Barker has been employed in the insurance industry for Advisors. Director of First Financial Bank, N.A. Hamilton, Ohio since 2010. Mr. Barker is an important member of the business community in Columbus, Indiana and we will look to his leadership and guidance as we continue to build our presence in key southern Indiana markets. Furthermore, his experience as the | 2010 | ||
Cynthia O. Booth 55 | President and Chief Executive Officer, | |||
Director of First Financial Bank, N.A. Hamilton, Ohio since 2010. Ms. Booth brings deep banking experience to the | 2010 |
Mark A. Collar 60 |
Chairman, Third Frontier Advisory Board (provides direction for State of Ohio’s investment in high tech industry); Mr. Collar brings a wealth of knowledge from his 32+ years at Procter & Gamble, including marketing, competitive market analysis, operations, mergers and acquisitions, financial management, sales, corporate strategy, risk management, regulatory, and quality control. Mr. Collar’s leadership roles in a number of organizations, including his membership on another publicly traded company board, provide us with insights into a number of opportunistic fields as well as dealing with government officials and agencies. | 2009 |
Claude E. Davis 53 | ||||
President and Mr. Davis’ years of experience in the banking industry as well as his extensive financial background provide leadership to the Board. As CEO, he is |
Corinne R. Finnerty 57 | ||||
Partner, First Financial Bank, N.A., Hamilton, Ohio since 1998.
| 1998 | |||
Murph Knapke 66 | Partner of Mr. Knapke has tenure with our Company and/or a bank affiliate since 1983 and provides valuable historical perspective on both the Company and the banking industry. His deep roots in the Celina, Ohio area provide representation on the Board for our Northwest Ohio market. His years as a practicing attorney give him enhanced perspective on legal and regulatory issues as well as Board fiduciary duties. | 1983 | ||
Susan L. Knust 60 | Managing Partner of K.P. Properties of Ohio LLC (industrial real estate); Managing Partner of Omega Warehouse Services LLC (public warehousing); former President of Precision Packaging and Services, Inc.; former Director of Middletown Regional Health System (renamed Atrium Medical System), Middletown, Ohio. Director of First Financial Bank, N.A., Hamilton, Ohio since 2005. As a seasoned business owner and entrepreneur for 28 years in the areas of manufacturing, warehousing and industrial real estate, Ms. Knust brings valuable insight to the Board in strategic and other matters. Ms. Knust’s business interests are similar in size to our key client base and she also has an understanding of our growing Cincinnati market area. Also, as a female business owner, her perspective and experiences have proven valuable to us. | 2005 | ||
William J. Kramer 53 | Vice President of Operations, Valco Companies, Inc., Coldwater, Ohio (VP & General Manager 2002–2008), an international company that manufactures products for the agricultural and horticultural industries; previously President of Pax Steel Products, Inc., from 1984–2002 (predecessor corporation to Valco); employed by Deloitte & Touche, LLP, Dayton, Ohio from 1982–1984; former director and Chair of the audit committee of an affiliate bank from 1987 to 2005. Director of First Financial Bank, N.A., Hamilton, Ohio since 2005. Mr. Kramer has been a CPA since 1984 with both public accounting and private company experience with substantial experience in financial reporting and accounting controls. He qualifies as an audit committee financial expert. Furthermore, his tenure with our Company and/or a bank affiliate since 1987 provides valuable historical perspective on both the Company and the banking industry. | 2005 | ||
Richard E. Olszewski 64 | Operator of two 7-Eleven Food Stores in Griffith, Indiana. Former director of an affiliate bank from 1995 to 2005. Director of First Financial Bank, N.A., Hamilton, Ohio since 2005.
| 2005 |
Maribeth S. Rahe 65 | President and CEO, Fort Washington Investment Advisors, Inc., an investment management firm and wholly owned subsidiary of Western & Southern Financial Group, Cincinnati, Ohio, since 2003. Director, Consolidated Communications Holdings, Inc., Mattoon, IL (NASDAQ: CNSL) (rural local exchange carrier), Audit Committee (Chair), Compensation Committee (member). Ms. Rahe’s local civic and philanthropic involvement includes the following board positions: Cincinnati Arts Association, Cincinnati Women’s Executive Forum, Cincy Tech, Cintrifuse, Woman’s Capital Club, United Way Investment Committee, Xavier University Williams College of Business Board of Executive Advisors, Cincinnati USA Regional Chamber of Commerce, Sisters of Notre Dame de Namur, Rush-Presbyterian-St. Luke’s Medical Center, and the Cincinnati Country Club. Director of First Financial Bank, N.A. Hamilton, Ohio since 2010. Ms. Rahe is well known in Cincinnati and is a recognized leader in the financial services community, both locally and nationally with over 42 years in the financial services industry (of which 28 has been in banking), including more than 25 years in management/executive management and board experience at other financial institutions. She brings a seasoned perspective, insight, and financial acumen into issues and strategies relating to our business, including regulatory relationships and enterprise risk management. | 2010 |
| (1) | Ages are listed as of December 31, |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL“FOR” THE ELECTION OF THESE AMENDMENTS TO THE ARTICLES OF INCORPORATION AND REGULATIONS.
Additional Director Who is Not Seeking Re-election at the Annual Meeting
In addition to the eleven directors named above who are each nominees for re-election to the Board of Directorsat the Annual Meeting, Mr. Donald M. Cisle, Sr. currently serves as a member of the Company adoptedBoard. Mr. Cisle has advised the material terms of the First Financial Bancorp Key Executive Short Term Incentive Plan (“Incentive Plan”),Company’s Corporate Governance and the Incentive Plan will became effective as of January 1, 2011 upon approval of the shareholdersNominating Committee that he does not intend to seek re-election at the annual meeting.. The purpose of the Incentive Plan is to ensure that bonus payments made to certain key executive employees of the Company will be tax deductible to the Company under the Code.
Donald M. Cisle, Sr. 59 | Managing member, The Cisle Co. LLC, Hamilton, Ohio, a consulting and development business. Retired President, Don S. Cisle Contractor, Inc., Hamilton, Ohio, construction contractor, which closed and sold its assets in 2009; former President of Seward Murphy, Inc., a family owned investment company dissolved in 2009. Director of First Financial Bank, N.A., Hamilton, Ohio since 1996. As a native of Hamilton, Ohio, our bank subsidiary’s headquarters, his long history with our Company provided our board and management with valuable insight into the history of the Company. Furthermore, as a significant long-term shareholder, Mr. Cisle brought insight into our retail shareholder. Finally, Mr. Cisle’s years as a small business owner provided us with added understanding of the issues such businesses face. | 1996 |
2011 Performance Categories and Measures | Threshold (3) (50% Payout) | Target (3) (100% Payout) | Maximum (3) (200% Payout) |
1.Financial Performance vs. Peer - Return on Assets - Earnings Per Share Growth Rate - Credit Quality (1) | 25%ile | 50%ile | 75%ile |
| 2. Enterprise Risk Management Performance | (2) | (2) | (2) |
3. Other - Operating Leverage (4) - Efficiency Ratio | 62% | 60% | 55% |
| 18 |
proposal 3The Treasury Regulations promulgated under Section 162(m) of the Code require the affirmative vote of a majority of the votes cast to approve the Incentive Plan. Your broker is not entitled to vote your shares on this matter if no instructions are received from you. Such broker non-votes, as well as votes to “Abstain,” are not considered votes cast and therefore will have no effect on the vote on this matter. The favorable vote of a majority of the votes cast will constitute the approval of the amendments to the Incentive Plan.—
The Audit Committee of the boardBoard has appointed Ernst & Young LLP as First Financial’s auditors for the year 2011 and, in accordance with established policy, that appointment is being submitted to shareholders for ratification. In the event the appointment is not ratified by a majority of votes cast, in person or by proxy, it is anticipated that no change in auditors would be made for the current year because of the difficulty and expense of making any change so long after the beginning of the current year, but that vote would be considered in connection with the auditors’ appointment for 2012.
Ernst & Young were the Company’s auditors for the year ended December 31, 2013, and a representative of the firm is expected to attend the Annual Meeting, respond to appropriate questions and, if the representative desires, which is not now anticipated, make a statement.
The following table sets forth the aggregate fees billed to the Company and related entities for the last two fiscal years by the Company’s independent registered public accounting firm.
| Fees by Category | 2013 | 2012 | ||||||
| Audit Fees | $ | 948,150 | $ | 1,290,207 | ||||
| Audit-Related Fees (1) | 152,000 | 100,683 | ||||||
| Tax Fees | -- | -- | ||||||
| All Other Fees (2) | 50,000 | 49,000 | ||||||
| Total | $ | 1,150,150 | $ | 1,439,890 | ||||
| 1. | Services covered by these fees consist of employee benefit plan audits and HUD compliance testing. |
| 2. | Services for information technology attack and penetration assessment. |
It is the policy of the Audit Committee that, before the Company engages an accounting firm to render audit services as the Company’s independent registered public accounting firm, the engagement must be approved by the Audit Committee. In certain situations, the Audit Committee has delegated pre-approval authority to its Chair when necessary, with subsequent reporting to the committee. In addition, before an accounting firm serving as the Company’s independent registered public accounting firm is engaged by the Company to render non-audit services, the engagement must be approved by the Audit Committee.
The Board of Directors unanimously recommends a vote “FOR”“FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered PUBLIC accounting firm for the fiscal year endING December 31, 2014.
In accordance with its written charter, the Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Company’s independent registered public accounting firm, Ernst & Young, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements to generally accepted accounting principles and on the Company’s internal control over financial reporting. In this context, the Audit Committee has reviewed and discussed with management and Ernst & Young the audited financial statements for the year ended December 31, 2011.
The Audit Committee discussed with the Company’s internal auditors and Ernst & Young the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and with Ernst & Young, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2013, for filing with the SEC. The Audit Committee has approved the selection of Ernst & Young as the Company’s independent registered public accounting firm for 2014.
| Members of the Audit Committee | |
| William J. Kramer, Chair | |
| David S. Barker | |
| Donald M. Cisle, Sr. | |
| Maribeth S. Rahe |
PROPOSAL 64 — ADVISORY (NON-BINDING) RESOLUTION ON EXECUTIVE COMPENSATION
We are asking shareholders to approve an advisory resolution on the Company’s executive compensation as reported in this proxy statement. As described below in the “Compensation Discussion and Analysis” section and tabular disclosure and accompanying narrative discussions of the Named Executive Officer (“NEO”) compensation in this proxy statement, the Compensation Committee believes that the balanced compensation mix consisting of base salary, annual cash incentives and long-term equity awards is fair and equitable and aligns management’s interests with the interests of stockholders.
| · | Base salary is designed to meet a minimum level of compensation necessary to attract and retain highly qualified employees. | |
| · | On August 20, 2013, Mr. Stollings also assumed the |
| · | Long-term equity awards are designed to reward executives for |
| · | One-half of Mr. Davis’ 2013 long-term incentive award (24,281 shares) was comprised of performance-based restricted stock that vests after three years only upon the attainment of certain pre-determined performance measures (generally total shareholder return and return on assets). In order to achieve target payout, performance at the 60th percentile of peers or better must be achieved. | |
| · | All other 2013 long-term incentive awards were awarded in restricted shares that vest over a three-year period with an added requirement for NEOs that 50% of after-tax vested shares must be held for two years following vesting. | |
| · | Annual cash incentives are designed to reward executives for achieving short-term |
| · | The committee decided to limit future employment agreements with NEOs only to the CEO and CFO. As such, the Company entered into an employment agreement with Mr. Stollings and a severance and change-in-control agreement with Mr. Langford, both on November 1, 2013. |
| · | Additional considerations include: |
| · | Clawbacks for certain incentive |
| · | Double-triggers with respect to change-in-control related benefits. |
| · | No income tax gross-ups. |
| · | Prohibition on re-pricing stock options. |
| · | An independent Compensation Committee that engages its own advisors/consultants. |
| · | For 2014: |
| · | Consistent with Company-wide merit practices, on March 3, 2014, the committee increased base salaries by approximately 3% for |
| · | In |
| · | Future long-term incentive awards will no longer contain provisions for the automatic acceleration of vesting upon a change-in-control event. Instead, a second trigger of either a material reduction in base pay or loss of employment |
| · | Effective January 1, 2014, as a result of the Company’s overall retirement benefit change, the Supplemental Executive Retirement Plan benefit was reduced from 9% to 5% of eligible earnings. |
| · | Also effective January 1, 2014, as a result of the Company’s recent retirement benefit changes, no additional credits will be provided to Mr. Davis under the Executive Supplemental Savings Agreement. |
We urge shareholders to read the “Compensation Discussion and Analysis” beginning on page ___ of this proxy statement,, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on pages ___ through ___, which provide detailed information on the compensation of our named executive officers.NEOs. The Compensation Committee and the board of directorsBoard believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officersNEOs reported in this proxy statement has contributed to the Company’s recent and long-term success.
In accordance2013, 2012, and 2011, shareholders approved the compensation of our NEOs with recently adopted Section 14AFOR votes of over 95.8%, 97.0%, and 97.0%, respectively, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as a matter of good corporate governance,votes cast. This year, we once again are asking shareholders to approve the following advisory resolution at the 2011 Annual Meeting of Shareholders:
RESOLVED, that the shareholders of First Financial Bancorp (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officersNamed Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statementproxy statement for the Company’s 20112014 Annual Meeting of Shareholders.
This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the board of directors.Board. Although non-binding, the boardBoard and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.
| 21 |
PROPOSAL 75 — ADVISORY VOTE ONADJOURNMENT OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
At the Annual Meeting, if the Board determines it is necessary to adjourn the meeting, we intend to move to adjourn the Annual Meeting. For example, if the number of shares represented and voting in favor of the proposal to amend the Articles of Incorporation is insufficient to adopt that proposal, our Board may make such a determination in order to enable the Company to solicit additional votes with respect to that proposal. If the Board determines it is necessary to adjourn the Annual Meeting, we may ask our shareholders to vote only on those proposals that have a sufficient number of votes to be adopted, and not on those proposals that lack sufficient votes.
In additionthis proposal we are asking you to authorize the holder of any proxy solicited by the Company to vote in favor the proposal to adjourn the Annual Meeting to another time and place. If the shareholders approve the proposal to adjourn the Annual Meeting, we could adjourn the meeting, as well as any adjourned session of the meeting, and use the additional time to solicit additional votes. We may solicit votes from shareholders that have previously voted. The approval of the proposal to adjourn the Annual meeting could mean that, even if we received proxies representing a sufficient number of votes against the proposal to adopt the amendment to the advisory approvalArticles of our executive compensation program,Incorporation to defeat that proposal, we are also seeking a non-binding determination from our shareowners as tocould adjourn the frequency with which shareowners would have an opportunity to provide an advisory approval of our executive compensation program. We are providing shareowners the option of selecting a frequency of one, two or three years, or abstaining. For the reasons described below, we recommend that our shareowners select a frequency of three years, or a triennial vote.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERSA VOTE TO CONDUCT FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY THREE YEARS.
General
The business and affairs of the Company are managed under the direction of the Board of Directors.Board. Members of the Board are kept informed through discussions with the President and the Company’s other officers, by reviewing materials provided to them and by participating in meetings of the Board and its committees. All members of the Board in 2010 also served as directors of the Company’s subsidiary bank, First Financial Bank, N.A. during 2010.
Board Leadership Structure
The Board is currently led by a non-executive Chair. The current Chairman of the Board, Murph Knapke, who is an independent director, presides over each board meeting and performs such other duties as may be incident to the office. Although our corporate documents would allow our Chair to hold the position of Chief Executive Officer, our Corporate Governance Principles provides that these two positions at First Financial Bancorp must be separate. Your boardBoard believes this separation allows our Chair to provide additional independent oversight of management. The offices of the Chair and CEOChief Executive Officer at the Company have been separate since 1997.
The Board’s Role in Risk Oversight
Assessing and managing risk is the responsibility of management of First Financial. Our Board, of Directors, with the assistance of the Risk Committee and other Board committees as discussed below, reviews and oversees our enterprise risk managementEnterprise Risk Management (“ERM”) program, which is an enterprise-wide program designed to enable effective and efficient identification and management of critical enterprise risks and to facilitate the incorporation of risk consideration into decision making.decision-making. The ERM program was established to clearly define risk management roles and responsibilities, bring together senior management to discuss risk, and promote visibility and constructive dialogue around risk at all levels of the organization. The Company’s risk governance structure starts with each line of business being responsible for managing its own risks. In addition, the Board of Directors and executive management have appointed a Chief Risk Officer to support the risk oversightrisk-oversight responsibilities of the Board and its committees and to involve management in risk management by establishing committees comprised of management personnel who are assigned responsibility for oversight of particular risk areas in the organization. An Enterprise Risk Management Committee (“ERMC”) comprised of senior management is the senior most focal point within our companyCompany to monitor, evaluate and recommend comprehensive policies and solutions to deal with all aspects of risk and to assess the adequacy of any risk remediation plans in the company’sCompany’s businesses. ReportingCurrently reporting up to the ERMC currently are various risk-related committees whose members are comprised of lines of business, risk management and senior officers. The Chief Risk Officer provides the boardBoard with a quarterly risk profile of the Company, as well as a report on the resultsrisk exposure of the Company from the viewpoint of the ERMC. Under the ERM program, management develops a holistic portfolio of Company enterprise risks by facilitating business and function risk assessments, performing targeted risk assessments and incorporating information regarding specific categories of risk gathered from various internal Company organizations.operations. Management then develops risk response plans for risks categorized as needing management focus and response and monitors other identified risk focus areas. Management provides regular reports on the risk portfolio and risk response and monitoring efforts to the ERMC and to the Risk Committee.
Our Board assumes a significant oversight role in risk management both through its actions as a whole and through its committees.
• | The M&A/Capital Markets Committee oversees the Company’s capital markets, treasury and capital planning activities. This committee’s role and relationship with the board are more fully described under “Committees of the Board – M&A/Capital Markets Committee.” |
Select members of management attend all Board meetings (other than executive sessions) and are available for questions regarding particular areas of risk.
Director Independence
The Board of Directors has determined that eight of its current nine members are independent directors as that term is defined under the rules of the Nasdaq Stock Market (the “Nasdaq”). Allall directors, other than our CEO, Claude E. Davis, are independent directors. To assist it in making determinations of independence, the Board has concluded that the following relationships are immaterial and that a director whose only relationships with the Company and its affiliates fall within these categories is independent:
Pursuant to its charter, the Audit Committee reviews and ratifies all related party transactions. Any loans to a director or a related interest are approved by the Board in accordance with banking laws. For a discussion of such relationships, see “—Other Business Relationships.”
Transactions with Related Parties / Other Business Relationships
Pursuant to an amendment to the Company, is a shareholder and an officer of McConnell Finnerty Waggoner PC, which has been retained by First Financial Bank, N.A. and previous Company bank subsidiaries during the prior fiscal year and the current fiscal year. During 2010 the Company’s subsidiaries paid the firm $48,751 in legal fees and reimbursable expenses. The Board of Directors has determined that these payments, which are below the applicable limits established by the rules of the Nasdaq, do not affect Ms. Finnerty’s status as an independent director.
Corinne R. Finnerty, a director of the Company, is a shareholder and an officer of McConnell Finnerty PC, which has been retained by First Financial Bank, N.A. and previous Company bank subsidiaries during the prior fiscal year and the current fiscal year. During 2013, the Company’s subsidiaries paid the firm approximately $3,564 in legal fees and reimbursable expenses (excludes court costs, recording fees, etc.). The Board has determined that these payments, which are below the applicable limits established by the rules of the NASDAQ, do not affect Ms. Finnerty’s status as an independent director. Pursuant to policies adopted by the Board (discussed in the following paragraph), Ms. Finnerty’s firm has not accepted any new matters from the Company since 2011.
Indebtedness of Directors and Management
Some of the officers and directors of the Company and the companies with which they are associated wereare clients of the banking subsidiary of the Company.First Financial Bank. The loans to such officers and directors and the companies with which they are associated (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest and nature of collateral, as those prevailing at the time for comparable transactions with other persons and (c) did not involve more than the normal risk of collectability or present other unfavorable features.
First Financial Bank has had, and expects to have in the future, banking transactions in the ordinary course of business with directors, officers, principal shareholders and their employeesassociates on the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with others. We presume that extensions of credit which comply with the Federal Reserve Regulation O to be consistent with director independence. In other words, we do not consider normal, arms-length credit relationships entered into in the ordinary course of business, and consistent with applicable federal banking regulations, to negateinterfere with a director’s independence.
Board Self-Assessment
The boardBoard conducts a self-assessment annually, which our Corporate Governance and Nominating Committee (“CGNC”)CGNC reviews and discusses with the Board. In addition, in 2011 we will have implemented a similar periodic self-assessment at each of the committees of the Board.
Director Education
The Board recognizes the importance of its members keeping current on Company and industry issues and their responsibilities as directors. All new directors attend orientation training soon after being elected to the Board. Also, the Board encourages attendance at continuing education programs for Board members, which may include internal strategy or topical meetings, third-party presentations, and externally-offered programs.
Nominating Procedures
It is the CGNC’s policy that it will consider director candidates recommended by shareholders in accordance with the procedures outlined in the Company’s Regulations. Under those procedures, shareholders who wish to nominate individuals for election as directors must provide:
| • | The age and principal occupation or employment of the proposed nominee; | |
| • | The number of common shares | |
| • | A representation that the shareholder making the nomination: |
- is a holder of record of shares entitled to vote at the meeting, and
- intends to appear in person or by proxy at the meeting to make the nomination;
| • | Any additional information regarding the proposed nominee required by the proxy rules of the Securities and Exchange Commission (the “SEC”) to | |
| • | The consent of the proposed nominee to |
In order to be recommended for a position on the Company’s Board of Directors by the committee, a proposed nominee must, at a minimum, (i) be able to comply with the Company’s Corporate Governance Principles, and (ii) through a combination of experience and education have the skills necessary to make an effective contribution to the Board of Directors.Board. In accordance with the Company’s Regulations, no one may be elected to the Board of Directors after reaching his or her seventieth birthday.
In connection with next year’s Annual Meeting of Shareholders, the committee will consider director nominees recommended by shareholders provided that notice of a proposed nomination is received by the Company no later than February 24, 2011,26, 2015, as provided in the Company’s Regulations. Notice of a proposed nomination must include the information outlined above and should be sent to First Financial Bancorp, Attention: Gregory A. Gehlmann, General Counsel &Anthony M. Stollings, Secretary, 201255 E. FourthFifth Street, Suite 2000,2900, Cincinnati, OH 45202.
Director Qualifications/Diversity
The committeeCGNC identifies nominees for director through recommendations by shareholders and through its own search efforts, which may include the use of external search firms. The committee evaluates nominees for director based upon criteria established by the committee and applies the same evaluation process to all director nominees regardless of whether the nominee is recommended by a shareholder. The criteria evaluated by the committee include, among other things, the candidate’s judgment, integrity, leadership ability, business experience and ability to contribute to board member diversity (including, but not limited to gender, race, and ethnicity, as well as experience, geography, qualifications, attributes and skills) in a wide variety of areas. Although our Corporate Governance Principles discuss its importance, we have not established a particular policy regarding the consideration of diversity in identifying director nominees. However, the CGNC recognizes that racial and gender diversity of the Board is an important part of its analysis as to whether the Board constitutes a body that possesses a variety of complimentarycomplementary skills and experiences. The committee also considers whether the candidate meets independence standards, is “financially literate” or a “financial expert,” is available to serve, and is not subject to any disqualifying factor. No one individual trait is given particular weight in the decision process. We believe each of the Company’s directors and director nominees possess the personal characteristics needed for the responsibilities as a director.
Share Ownership Guidelines
The Company requires directors are required to own CompanyFirst Financial stock equal to at least three times the director’s annual retainer within three years of first becoming a director of the Company. All directors who have been non-employee directors for at least three years are in compliance with this requirement. The requirement inCompany recently revised the First Financial Bank, N.A. Bylaws that a director own at least $1,000 of First Financial stock upon electionguidelines for directors to include 4,000 shares or appointmentthree times the annual retainer whichever is less. This revision to the Board is stillguidelines was in place. Currently, we do not haveeffect on the date of the 2012 shareholder meeting. The Company also implemented stock ownership and retention guidelines for our executive officers.
Director Change in Status
In the event of a change in the principal occupation, business association or residence of a director, such director shall submit his/her resignation to the Chair of the Corporate Governance & Nominating Committee.CGNC. The Corporate Governance & Nominating CommitteeCGNC shall determine if it is in the best interest of the Company to accept the resignation or to allow for such director to continue serving as a member of the board of directors.
Other Directorships and Committee Memberships
To preserve independence and to avoid conflicts of interest, directors are to limit the number of other public company boards on which they serve to three or fewer. Directors are to advise the Chairman of the Board and the Chair of the CGNC before accepting an invitation to serve on another public company board. Members of the Audit and Compensation Committees are discouraged from serving on a number of similar committees of other public companies that would affect their ability to function effectively on the Boards and their committees. In addition:
| · | The CEO is limited to serving on the boards of no more than two additional public |
| · | Absent prior approval by the CGNC, all Board members are expected to limit their board membership on non-public/charitable organizations to no more than five. |
Codes of Business Conduct and Ethics and Corporate Governance Principles
We have adopted a Code of Business Conduct and Ethics which applies to all First Financial (including subsidiaries) directors, officers and employees. The code governs the actions and working relationships of First Financial employees, officers and directors. The code addresses, among other items, conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of corporate assets and compliance with laws, rules and regulations and encourages the reporting of any illegal or unethical behavior.
We also maintain a Code of Ethics for Senior Financial Officers which addresses some of the same issues as the Code of Business Conduct such as the importance of honesty, integrity and confidentiality, but establishes specific standards related to financial controls and reporting for senior financial officersSenior Financial Officers of First Financial. We will disclose any substantive amendments to or waiver from provisions of the code made with respect to the chief executive officer,Chief Executive Officer, principal financial officer or principal accounting officer on our website.
We have also adopted Corporate Governance Principles, which are intended to provide guidelines for the governance of First Financial by the Board and its committees. The Corporate Governance Principles cover, among other issues, executive sessions of the board of directors,Board, director qualifications, director responsibility, director independence, voting for directors, limitations on other boards, continuing education for members of the board of directors,Board and internal performance evaluations.
These documents are available within the Investor Relations section of our website atwww.bankatfirst.com/Investorinvestor under the “Corporate Governance” link.
The Audit Committee and the Board of Directors have approved procedures for the receipt, retention and treatment of reports or complaints to the Audit Committee regarding accounting, internal accounting controls, auditing matters and legal or regulatory matters. There are also procedures for the submission by the Company or affiliate employeesassociates of confidential, anonymous reports to the Audit Committee of concerns regarding questionable accounting or auditing matters.
Succession Planning
In light of the critical importance of executive leadership to First Financial’s success, we have instituted an annual succession planning process, which is guided by the CGNC (“CGNC”).CGNC. The process started first for our CEO and has been developed for the CEO’s direct reports and will behas been implemented enterprise wideenterprise-wide for senior levelsenior-level managers. Management regularly identifies high potential executives for additional responsibilities, new positions, promotions or similar assignments to expose them to diverse operations within the Company, with the goal of developing well-rounded and experienced senior leaders. As part of the annual process, the CEO and human resourcesthe Talent Management Department collaborate with the CGNC to prepare succession and management development and review. The CGNC reports to the full boardBoard on its findings and the Board deliberates in executive session on the CEO succession plan.
Policy on Majority Voting
Although the Articles and Regulations provide that director nominees who receive the greatest number of shareholder votes are automatically elected to the Board, of Directors, regardless of whether the votes in favor of such nominees constitute a majority of the voting power of First Financial. Nevertheless, we haveBoard has adopted a policy on majority voting for the election of directors in our Corporate Governance Principles. You can view these within the Corporate Governance section of our website at
Upon its receipt of Directors.
The committeeCGNC also will consider a range of possible alternatives concerning the director’s tendered resignation as the members of the committee deem appropriate, including without limitation, acceptance of the resignation, rejection of the resignation, or rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by the committee to have substantially resulted in the “withheld” votes. The Board will take formal action on the committee’s recommendation no later than 90 days following the certification of the shareholder vote. In considering the committee’s recommendation, the Board will consider the information, factors and alternatives considered by the committee and such additional information, factors and alternatives as the Board deems relevant. We will publicly disclose, in a Form 8-K filed with the SEC, the Board’s decision, together with a full explanation of the process by which the Board made its decision and, if applicable, the Board’s reason or reasons for rejecting the tendered resignation within four business days after the Board makes its decision.
Communicating with the Board of Directors
The Board of Directors has established a process by which shareholders may communicate with the Board of Directors.Board. Shareholders may send communications to the Company’s Board of Directors or to individual directors by writing to:
Attn: Board of Directors (or name of individual director)
First Financial Bancorp
255 E. Fifth Street, Suite 2900
Cincinnati, OH 45012-1242
Letters mailed to this post office boxaddress will be received by the director who serves as chairChair of the Audit Committee or the director who serves as chairChair of the NominatingCorporate Governance and Corporate GovernanceNominating Committee, as alternate. A letter addressed to an individual director will be forwarded unopened to that director by the chairChair of the Audit Committee.
Information regarding this process is also available within the Investor Relations section of our website atwww.bankatfirst.com/Investorinvestor under the “Corporate Governance” link. For questions regarding this process, shareholders may callcontact the Company’s General Counsel & Secretary, Gregory A. Gehlmann,Anthony M. Stollings, at (513) 979-5772.
Meetings of the Board of Directors and Committees of the Board
Board Meetings
During the last fiscal year, the Board of Directors held sixeight regularly scheduled meetings and two special meetings. All of the incumbent directors attended 75% or more of those meetings and the meetings held by all board committees on which they served, during the periods that they served as directors.
Executive Sessions of Non-Management Directors
The independent directors meet in regularly scheduled meetings at which only the independent directors are present. During 2010,2013, the independent directors held sixseven such meetings.
Board Committees
The Board of Directors has the following standing Committees: Audit, Compensation, Corporate Governance and Nominating, Compensation, Audit,M&A/Capital Markets and Risk. Other committees are formed as needed.
Corporate Governance and Nominating Committee
.The CGNC reports to the Board on corporate governance matters, including the evaluation of the Board and itsCompensation Committee
.The Compensation Committee’s primary responsibilities include:| · |
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The Committeecommittee has the authority to retain compensation consultants and other independent advisors to assist in the evaluation of director and executive compensation. During 2010,2013, the Committeecommittee utilized the services of an independent compensation consultant.
The Compensation Committee is comprised of the following directors, each of whom satisfies the definition of independence for Compensation Committee members under the rules of the NasdaqNASDAQ and the SEC: Susan L. Knust (Chair), J. Wickliffe Ach, David S. Barker, and William J. Kramer. The Compensation Committee held sixfour meetings during 2010.
Audit Committee
.Risk Committee. The Risk Committee meetings).
| · | Review and approve significant risk assessment and risk management policies, and develop and implement additional policies relating to risk assessment and risk |
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| · | Consult with the Chief Risk Officer regarding credit and other risks, as |
| · | Consult with the Audit and Compensation Committees regarding financial and compensation risks, as |
| · | Engage our management in ongoing risk appetite discussions as conditions and circumstances change and new opportunities arise. |
The Risk Committee is comprised of the following directors, each of whom satisfies the definition of independence for Risk Committee members under the rules of the NasdaqNASDAQ and SEC: Richard E. Olszewski (Chair), Cynthia O. Booth, Mark A. Collar, and Corrine R. Finnerty and Cynthia O. Booth.Finnerty. The Risk Management Committee held fivefour meetings during 2010.
M&A/Capital Sub-Committee
Availability of Committee Charters
. The Corporate Governance and Nominating, Compensation, Risk, Audit, andThe Compensation Committee reviews the individual components and total amount of director compensation at least annually. The Compensation Committee will recommend changes in director compensation to the Board aided by its review of competitive pay data for non-employee directors of the financial services companies in the Company’s Peer Group.Group (See “Compensation Discussion and Analysis”). It may recommend changes to director compensation more or less frequently based on its analysis of this competitive data. The Compensation Committee uses the same Peer Group for this purpose as used by the committee to determine competitive pay for named executives.NEOs. See “-External“External Benchmarks” in the CD&A below.Compensation Discussion and Analysis (or “CD&A”). The Compensation Committee has retained Towers Watson to act as the Committee’scommittee’s independent compensation consultant.
| Name | Fees Earned or Paid in Cash ($) (1) (2) | Stock Awards ($)(3) | All Other Compen-sation ($)(5) | Total ($) | |||||||||||||
| J. Wickliffe Ach | $ | 42,037 | $ | 60,002 | (3) | $ | 270 | $ | 102,309 | ||||||||
| David S. Barker | 21,583 | 20,007 | (4) | — | 41,590 | ||||||||||||
| Donald M. Cisle, Sr. | 47,621 | 60,002 | (3) | 270 | 107,893 | ||||||||||||
| Cynthia O. Booth(6) | — | — | — | — | |||||||||||||
| Mark A. Collar | 39,604 | — | 2,942 | 42,546 | |||||||||||||
| Corinne R. Finnerty | 41,264 | 60,002 | (3) | 270 | 101,536 | ||||||||||||
| Murph Knapke | 67,348 | — | 2,981 | 70,290 | |||||||||||||
| Susan L. Knust | 42,626 | — | 995 | 43,621 | |||||||||||||
| William J. Kramer | 51,476 | — | 2,942 | 54,418 | |||||||||||||
| Richard E. Olszewski | 48,627 | 60,002 | (3) | 270 | 108,899 | ||||||||||||
| Maribeth S. Rahe | 20,833 | 20,007 | (4) | — | 40,840 | ||||||||||||
| Name | Fees Earned or Paid in Cash ($) (1) (2) | Stock Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||
| J. Wickliffe Ach | $ | 46,750 | $ | 26,001 | $ | 3,226 | 75,977 | |||||||||
| David S. Barker | 36,500 | 26,001 | 1,439 | 63,940 | ||||||||||||
| Cynthia O. Booth | 30,500 | 26,001 | 1,439 | 57,940 | ||||||||||||
| Donald M. Cisle, Sr. | 41,375 | 26,001 | 3,226 | 70,602 | ||||||||||||
| Mark A. Collar | 32,750 | 26,001 | 1,439 | 60,190 | ||||||||||||
| Corinne R. Finnerty | 30,500 | 26,001 | 3,226 | 59,727 | ||||||||||||
| Murph Knapke | 67,500 | 28,505 | 1,439 | 97,444 | ||||||||||||
| Susan L. Knust | 41,625 | 26,001 | 1,439 | 69,065 | ||||||||||||
| William J. Kramer | 47,250 | 26,001 | 1,439 | 74,690 | ||||||||||||
| Richard E. Olszewski | 38,000 | 26,001 | 3,226 | 67,227 | ||||||||||||
| Maribeth S. Rahe | 35,750 | 26,001 | 1,439 | 63,190 | ||||||||||||
| (1) | Includes retainers, board and committee attendance fees and retainers for committee chairs for both First Financial Bancorp and First Financial Bank. |
| (2) | Pursuant to the Company’s Director Fee Stock Plan, directors may elect to have all or any part of the annual retainer fee paid in the Company’s common shares. See also “- Director Stock Fee |
| Name | Amount of Fees Used to Purchase Common Shares | |||
| J. Wickliffe Ach | $ | 5,000 | ||
| David S. Barker | 5,833 | |||
| Donald M. Cisle, Sr. | 6,800 | |||
| Cynthia O. Booth(6) | — | |||
| Mark A. Collar | 2,000 | |||
| Corinne R. Finnerty | 13,200 | |||
| Murph Knapke | 13,200 | |||
| Susan L. Knust | 10,000 | |||
| William J. Kramer | 13,200 | |||
| Richard E. Olszewski | 13,200 | |||
| Maribeth S. Rahe | 13,333 | |||
| Name | Amount of Fees Used to Purchase Common Shares | |||
| J. Wickliffe Ach | $ | 6,500 | ||
| David S. Barker | 26,000 | |||
| Cynthia O. Booth | 15,600 | |||
| Mark A. Collar | 2,600 | |||
| Corinne R. Finnerty | 10,400 | |||
| Murph Knapke | 13,000 | |||
| Susan L. Knust | 13,000 | |||
| William J. Kramer | 6,500 | |||
| Richard E. Olszewski | 17,342 | |||
| Maribeth S. Rahe | 26,000 | |||
| (3) | Total value is computed utilizing the grant date market value for restricted stock awards. See Note |
| (4) |
Board/Committee Fees
Effective July 27, 2010,23, 2012, board meeting fees were eliminated and the non-employee directors of the Company and First Financial Bank receivereceived (a) annual retainers of $10,000$13,000 and $10,000, respectively;$13,000, respectively. In addition, committee chairs of the Corporate Governance/Nominating and (b) $750 for each boardRisk Committee and committee meeting attended.Trust Committee chairs receive annual retainers of $7,500; however, the chairChairs of the Audit and the Compensation Committee receivesreceive a $10,000 annual retainer and the chair of the Risk Committee receives an additional retainer of $2,500 through December 31, 2011, to recognize time expectations of establishing the new Committee and the interaction with the Federal Reserve to meet expectations of Company new ERM program.retainer. These chair retainers are to recognize the extensive time that is devoted to committee matters including meetings with management, auditors, attorneys and consultants, and preparing committee agendas. Furthermore, the Chair and Vice Chair of the Company receive additional annual retainers of $40,000 and $7,500 annually, respectively. Director fees are paid quarterly.
Director Stock Plans
In 2006,2009, First Financial’s shareholders approved the Amended and Restated 19992009 Non-Employee Director Stock Plan. The plan provided that directors can receive options and/or restricted stock awards. BeginningPlan and in 2006, upon election or re-election2012 approved amendments to a three-year term,the plan. In 2013, each non-employee director receives $60,000received $26,000 in value of restricted stock which vest 1/3 eachvests one year afterfrom the first year following election or re-election. Prior to 2006, upon election or re-election to a three-year term, each non-employee directordate of grant. The Chair of the Company received stock options with an expectedadditional $2,500 in value of $60,000restricted stock which also vests one year from the date of grant. All dividends on such restricted stock accrue and are paid at the time of grant.the restricted stock vests. Grants to non-employee directors are made on the date of the annual meetingAnnual Meeting based on the closing price of the Company’s common shares that day. No further awards can be granted
In addition, shares reserved under the 19992012 Stock Plan also are available for grant to directors once shares from the 2009 Non-Employee Director Stock Plan as it expired by its terms on April 26, 2009. The 1999 Director Stock Plan will remain in effect with respect to awards already granted under the plan until such awards have been exercised, forfeited, canceled, have vested, expired or otherwise terminated in accordance with the terms of such grants.
Stock Grants to Nominee Directors
In the event Directors Barker, Booth, Knust and Rahethat the eleven nominees, currently serving as non-executive directors, are re-elected to the Board, and the amendments to the Articles and Regulations are approved each of these directors will receive a grant of $20,000$26,000 of restricted stock from the 2009 DirectorsNon-Employee Director Stock Plan which would vest one year from the date of grant. In the event the amendments (ProposalsPlan. At April 2, and 3) are not adopted, Directors Barker, Knust and Rahe will each receive a grant of $60,000 of restricted stock which would vest over a three-year period (notwithstanding the amendments, Ms. Booth will receive $20,000 of restricted stock which would vest one year from the date of grant). At March 28, 2011,2014, the closing price of our common shares was $______$[________] per share, which would equate to a grant of approximately _________[_____] restricted shares each.
Director Fee Stock Plan
Each year, directors are given the opportunity to have all or a portion of their board fees invested in the Company’s common stock.shares. Elections are made once a year. Shares are purchased on the open market by an independent broker dealer after the payment of the quarterly board fees.
Reimbursement
Directors are entitled to reimbursement of their reasonable travel expenses for attending Board of Director and Committeecommittee meetings. Claude E. Davis, who is also an employee of the Company, did not receive any additional fees for serving on the Board of Directors and therefore has been omitted from the table. For a discussion of Mr. Davis’Davis’s compensation, see “Executive Compensation.”
The following describes at least the last five years of business experience of executive officers of First Financial, or its principal wholly-owned subsidiary First Financial Bank, who are not Directors of First Financial. The descriptions include any other directorships at public companies held during the past five years.
| Members of the Compensation Committee: |
| Susan L. Knust, Chair |
| J. Wickliffe Ach |
| William J. Kramer |
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This CD&A describes and explains the Company’s executivematerial elements of 2013 compensation decisions for 2009 for the fivesix executive officers named in the Summary Compensation Table. These named executives officers (or NEOs) are:
Claude E. Davis, President and Chief Executive Officer
Anthony M. Stollings, Executive Vice President, Chief Financial Officer and Chief Administrative Officer
Richard S. Barbercheck, Executive Vice President and Chief Credit Officer[1]
Kevin T. Langford, President Consumer Banking, Officer
C. Douglas Lefferson, President Commercial Banking and Wealth Management, and President Eastern Markets
J. Franklin Hall, Executive Vice President andFormer Chief Financial Officer
| 1 | Mr. Barbercheck has been identified as a NEO effective as of the date of the Proxy Statement and, as such, his compensation for 2013 was not reviewed by the Compensation Committee. |
You should read this section of the proxy statement in conjunction with the advisory vote that we are conducting on the compensation of our NEOs (see Proposal 4 – Advisory (Non-Binding) Resolution on Executive Vice President and General Counsel
Introduction
The banking industry faced another challenging yeareconomic environment in 2013 with continued high U.S. unemployment; a historically low interest rate environment and moderate economic growth. The regulatory landscape continued to evolve with multiple outcomes stemming from the continued problems in the economy and the enaction of sweeping legislation. In spiteimplementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Despite these challenges, First Financial remained profitable, outperformedextended its peersprofitability for a 93rd consecutive quarter. The bank effectively executed on its announced efficiency initiative and was able to position itselfdelivered 100% of the targeted $17.1 million in expense savings ahead of schedule. In December 2013, the Company announced two strategic acquisitions in the Columbus, Ohio market and, in early 2014, announced the hiring of strong commercial and residential mortgage lending teams in Ft. Wayne, Indiana—two markets previously identified as presenting strong prospects for future growth. Despite the continued difficult economic environment, our management team made significant progress in achieving our strategic, operational, and financial goals for 2010.
2013 Business Highlights of 2010 included:
| · | Earnings for 2013 were impacted by two significant, one-time items that were not indicative of normal business operations, and therefore should be highlighted in the context of actual operating results: 1) A $22.4 million pre-tax non-cash valuation adjustment on its FDIC indemnification asset as disclosed by the Company on January 22, 2014 which was primarily the result of improvement in future expected cash flows on loans covered by a loss sharing arrangement with the FDIC, a meaningful decline in loss claims filed with the FDIC, higher reimbursements to the FDIC related to positive asset resolutions in recent periods and the significantly shorter remaining life of the indemnification asset in comparison to 2) Additionally, the Company incurred pre-tax pension settlement charges of $6.17 million resulting from employee-driven activity |
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| · | Maintained | |
| · | The repurchase of 750,145 shares coupled with the payment of regular and variable dividends paid resulted in 151.4% of 2013 full year net income returned to shareholders | |
| · | Five-year total return to shareholders exceeds that of the KBW Regional Bank Index (which are peers with respect to the short-term incentive plan or “STIP”)(See “Pay for Performance” discussion below) |
For a detailed discussion of our overall performance in 2013, we refer you to our 2013 Annual Report available on our website at www.bankatfirst.com/investor. To request a copy, see “Annual Report” on the last page of this proxy statement.
2013 Executive Compensation Highlights
| · | On January 18, 2013, Mr. Stollings, EVP and Chief Risk Officer also became Chief Financial Officer of the Company. Mr. Stollings continued to serve as the Interim Chief Risk Officer until a successor was appointed on February 25, 2013. |
| · | Consistent with Company-wide merit practices, base salaries were increased approximately 2.94 - 3.64% for all NEOs with the exception of Mr. Stollings, whose base salary increased 15.38% as a result of his promotion to CFO. |
| · | There were no target incentive changes for NEOs except for Mr. Stollings, whose long-term incentive target increased from 40% to 50% as a result of his promotion to CFO. |
| · | One-half of Mr. Davis’ 2013 long-term incentive award (24,281 shares) was comprised of performance-based restricted stock that vests after three years only upon the attainment of certain pre-determined performance measures (generally total shareholder return and return on assets). In order to achieve target payout, performance at the 60th percentile of peers or better must be achieved. |
| · | All other 2013 long-term incentive awards were awarded in restricted shares that vest over a three-year period with an added requirement for NEOs that 50% of after-tax vested shares must be held for two years following vesting. |
| · | The committee approved several changes to the short-term incentive plan at the beginning of the 2013 plan year: |
| · | To simplify the plan design and lessen redundancy, the number of performance measures for the short-term incentive plan was reduced from six to three equally weighted measures (return on assets, earnings per share growth and efficiency ratio). |
| · | The duration of the performance measurement period for executive management participants was changed to mirror that of all other plan participants from 36 months to 12 months to mitigate payout disparities between the two categories of participants. |
| · | On August 20, 2013, Mr. Stollings also assumed the role of Chief Administrative Officer in addition to his Chief Financial Officer duties. The role of President for First Financial Bank, N.A. was divided among each line of business leader resulting in the designation of Mr. Lefferson as President, Commercial Banking & Wealth Management, Mr. Langford as President, Consumer Banking, and Jill Stanton as President, Mortgage Banking. |
| · | The committee approved base salary increases of 12.28% for both Messrs. Stollings and Langford on September 12, 2013 as a result of their increased responsibilities. |
| · | The committee decided to limit future employment agreements with NEOs only to the CEO and CFO. As such, the Company entered into an employment agreement with Mr. Stollings and a severance and change-in-control agreement with Mr. Langford on November 1, 2013. |
| · | The committee approved the Company’s 2013 Short-Term Incentive Plan payout at 50.6% of target for all participantsexceptthe CEO. The non-CEO payout was based on results excluding the $22.4 million valuation adjustment on the FDIC indemnification asset as disclosed by the Company on January 22, 2014. Mr. Davis recommended to the Committee that his payout follow the plan formula as originally designed with no discretionary adjustments which resulted in a 0% payout for the CEO. |
| · | Towers Watson was retained by the committee to provide general executive compensation consulting services. |
2013 Corporate Governance Highlights
| · |
| · | Continued to inventory all incentive compensation plans and evaluate | |
| · | The Compensation Committee charter was revised to comply with recent updates to NASDAQ listing standards pertaining to the review of consultant independence and annual review of the committee’s charter. |
Committee Actions for 2014
The design of the executive compensation program is reviewed annually by the Company and the committee to ensure the program continues to support the Company’s compensation philosophy and strategic business objectives. During the most recent review, the Company identified opportunities to more closely align the program with the overall compensation philosophy and objectives. An overview of the material changes made for 2014 is shown below.
| · | ||
| · | Also effective January 1, |
| · | In addition to the CEO, long-term incentive awards will include a performance-based vesting feature for the following NEOs: Chief Financial Officer and Chief Administrative Officer; President, Consumer Banking and President, Western Markets; and President, Commercial Banking and Wealth Management and President, Eastern Markets (see 2013 Long-Term Incentive Plan Design and Awards”) | |
| · | No performance based restricted stock award may be earned in the event earnings per common diluted share are below $0. This practice mirrors that of |
Opportunity for Shareholder Feedback
The committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their impactviews to the committee as described under the heading “Communicating with the Board of Directors” in this proxy statement. In addition, the advisory vote on the compensation paidof the NEOs provides shareholders with an opportunity to our named executives, and the specific compensation decisions made by the Compensation Committee relating to each component of compensation.
Compensation Philosophy and Objectives
The Company’s compensation philosophy is based on the following guiding principles that the Compensation Committee believes best supportssupport the Company’s strategy. As such,overall objectives of the executive compensation program. Our executive compensation programs should:
| · | Drive alignment between Company strategy, executive pay, and shareholder value creation |
| · | Create a clear line of sight between individual responsibilities and company objectives |
| · | Provide transparency around corporate goals and objectives, measures and performance outcomes |
| · | Incorporate simplicity, flexibility and discretion to reflect individual circumstances and changing business conditions/priorities |
| · | Pay for Performance |
| · | Align with market (peer) median for target performance and incorporate upside potential for top quartile performance |
| · | Differentiate pay based on performance, contribution, and value added |
| · | Attract, motivate, and retain key talent to deliver consistent long-term performance |
| · | Promote a competitive, balanced market-based total compensation package |
| · | Support internal equity through eligibility and target opportunities |
| · | Incorporate proper governance practices to prevent/mitigate inappropriate risk-taking by: |
| · | Encompassing a long-term focus with the ability to clawback compensation |
| · | Limiting upside potential via maximum payout ceilings |
| · | Including threshold requirement(s) before payout is made |
| · | Cross-functional plan design reviews and committee approval of final design and payouts |
Elements and Mix of Compensation
To achieve the above-stated principles and objectives, the 2013 executive compensation program, is intended to supportas in prior years, consisted primarily of the achievement of our business strategy while aligning each executive’s financial interests with those of shareholders.
| · |
Base Salary. To competitively compensate for day-to-day contributions, skills, experience and |
| · |
| · | Long-term equity |
| · | Non-performance based |
| Employment agreements (including |
| Retirement and other benefits; and |
| Certain perquisites and other personal |
The Compensation Committee takes a holistic approach to establishing the total compensation package for its executives;executives and each element of compensation is interdependent on the other elements. Applying the company’sCompany’s core values and drawing upon the sources of informationprinciples and philosophy discussed above, the Compensation Committee utilizes the various elements of compensation as building blocks to construct a complete compensation package for each executive that appropriately satisfies the core design criteria of competitiveness, pay for performance, alignment with shareholder interests, competitiveness, and compliance with all legal and regulatory guidelines.
The mix and the relative weighting of each compensation element reflect the competitive market and the Company’s compensation philosophy. The mix of pay may be adjusted from time to time to best support our immediate or longer-term objectives, changes in executive responsibility, as well as internal consistency.
Target compensation for each NEO is a mix of cash and long-term incentives. A substantial portion of this mix is at risk and varies based on performance. The emphasis on compensation elements related to performance is specifically intended to affect the actual level of compensation realized versus target. If the Company performs well (based on internal objectives, as well as peer group comparison) and longer-term shareholder value increases, award levels are intended to be strong. If the Company underperforms, award levels and values will be negatively impacted.
Below is a chart that reflects the mix of each element of target compensation as well as compensation at risk as percentages of target total compensation as of December 31, 2013. Compensation at risk is comprised of short and long-term incentives. Approximately 63% of our CEO’s and 47% of our other NEOs’ target compensation in 2013 were subject to performance and/or vesting requirements.
| Base Salary | Annual Short-Term Incentive | Long-Term Incentive | % of Compensation at Risk | |||||||||||||
| CEO | 37 | % | 22 | % | 41 | % | 63 | % | ||||||||
| Other NEOs (Average) | 53 | % | 20 | % | 27 | % | 47 | % | ||||||||
The 2013 Compensation Decision-Making Process
Three parties play an important role in establishing compensation levels for First Financial’s executive officers: (i) the Compensation Committee; (ii) senior management; and (iii) outside advisors. The sections that follow describe the role each of these parties plays in the compensation-setting process, as well as other important factors that impact compensation decisions.
Role of the Compensation Committee.The Compensation Committee has the authority to:
| · | Review and approve the composition of the peer group companies used to benchmark the Company’s pay practices, target pay opportunities, establish performance goals and objectives and evaluate company performance; | |
| · | Approve the executive compensation plan design and target structure including setting targets for incentives, using management’s internal business plan, industry and market conditions and other factors; | |
| · | Review the performance and compensation of the CEO and specified CEO direct reports, including the named executive officers in this proxy statement, as well as other officers; | |
| · | Determine the amount of, and approve, each element of total compensation paid to the NEOs, and the general elements of total compensation for other senior officers. The Compensation Committee reviews all components of compensation (both target and actuals) for the CEO and the other NEOs, including base salary, bonus, and long-term incentives; and | |
| · | Define potential payments to executive officers under various termination events, including retirement, termination for cause and not for cause, and upon a change in control. |
In determining the amount of NEO compensation each year, the Compensation Committee reviews competitive market data from the banking industry as a whole and the peer group specifically, as described above. It makes specific compensation decisions and awards based on such data, along with Company performance, individual performance and other circumstances as appropriate.
At meetings in early 2013, the Compensation Committee reviewed the Companys performance for the most recently completed fiscal year and the business plan for the coming year. This review considered corporate and individual performance, changes in any NEO’s responsibilities, data regarding peer practices, and other factors. In addition, the committee reviewed tally sheets prepared by management for each of the NEOs. The sheets provide a comprehensive view of the Company’s payout to each NEO, including all components of compensation, benefits and perquisites. (See also “Tally Sheets”).
Role of Executive Management in Compensation Decisions for NEOs.Throughout the year, the Compensation Committee meets with the CEO and other executive officers to solicit and obtain recommendations with respect to the Company’s compensation programs and practices. The CEO makes recommendations to the Compensation Committee as to the appropriate base salaries, annual cash incentive opportunities and stock awards, as well as threshold, target and maximum performance objectives for the NEOs other than himself. In making a recommendation for any executive officer who does not report directly to him, the CEO considers compensation recommendations made by the executive officer’s manager.
The Company’s Talent Management Department and other members of management assist the Compensation Committee in the administration of the Company’s executive compensation program and the Company’s overall benefits program. Members of the Talent Management Department periodically make available to the Compensation Committee information regarding the value of prior long-term incentive grants and participation in the Company’s plans. This information includes: (i) accumulated gains, both realized and unrealized, under restricted stock, stock option, and other equity grants; (ii) the cost of providing each perquisite; (iii) projected payments under the Company’s retirement plans; and (iv) aggregate amounts accumulated under nonqualified deferred compensation plans. Management helps prepare the information, including the tally sheets, used by the Compensation Committee in making its decision. Towers Watson assists the Compensation Committee in making its decisions.
Management also provides the Compensation Committee with information regarding potential payments to the Company’s executive officers under various termination events, including both the dollar value of benefits that are enhanced as a result of the termination event and the total accumulated benefit, which is sometimes called the “walk-away” amount. Similar information is provided regarding the “Other Potential Post-Employment Payments” defined below (which reports only the amount that is enhanced as a result of the termination event in order to not double-count compensation that we reported in previous years).
In 2013, the CEO, Chief Talent Management Officer, and Corporate General Counsel attended committee meetings, but were not present at executive sessions when matters related to them were being decided. In addition, the Company’s Compensation Director attends committee meetings and participates in executive sessions of the committee.
The CEO participated in the portion of the Compensation Committee meeting at which compensation for the NEOs other than himself was discussed, along with Talent Management. No executive officer was part of the final deliberations and decisions impacting their own compensation. In approving compensation for 2013, the Compensation Committee considered the CEO’s recommendations for the NEOs other than himself. The Compensation Committee, in consultation with Towers Watson, made its own determinations regarding the compensation for the CEO, which were then ratified and approved by the Board.
Role of the Compensation Consultant.To assist in its efforts to meet the objectives outlined above, in 2013 the Compensation Committee retained Towers Watson to provide general executive compensation consulting services to the committee and to support management’s need for advice and counsel. This independent consultant also performs special executive compensation projects from time to time as directed by the committee and reports to the Compensation Committee Chair. Pursuant to the Compensation Committee’s charter, the Compensation Committee has the power to retain or terminate such consultant and engage other advisors.
The independent compensation consultant typically collaborates with management to obtain data, clarify information, and review preliminary recommendations prior to the time they are shared with the Compensation Committee. The consultant provides data regarding market practices and works with management to develop recommendations for changes to plan designs and policies consistent with the philosophies and objectives discussed earlier.
Fees of Compensation Consultant.As discussed earlier, in 2013, the Compensation Committee utilized Towers Watson to provide advice regarding the Company’s compensation practices for its executives and directors. Fees billed by Towers Watson in 2013 for advice and services provided to the Compensation Committee were $48,998.
During 2013, Towers Watson also provided services to our Company relating to non-executive compensation, including ad hoc compensation projects, retirement and pension plan administration, actuarial services and related disclosure requirements. Services provided to management and not the Compensation Committee were approved by management and not the Compensation Committee. Fees billed by Towers Watson in 2013 for additional services provided were $467,389. Such fees increased from 2012 as a result of services provided by Towers Watson relative to the implementation of significant changes to the Company’s retirement programs for 2014.
Upon consideration of factors pursuant to NASDAQ compensation committee independence rules, the committee has concluded that no conflict of interest exists that would prevent the outside compensation advisor from independently representing the committee. The committee’s conclusion was based on the following factors:
| · | Executive compensation consulting services provided to the Compensation Committee and other consulting services provided to management were performed by separate and distinct divisions of Towers Watson; | |
| · | The Compensation Committee’s decision to engage Towers Watson was independent of management’s engagement of Towers Watson; | |
| · | Total fees paid in 2013 to Towers Watson were not material in the context of total revenues disclosed in the consulting firm’s most recent annual report; |
| · | Towers Watson has adopted and disclosed to the committee its executive compensation consulting protocols for client engagements and the committee believes these protocols provide reasonable indications that conflicts of interest will not arise; | |
| · | The advisor reports directly to the Compensation Committee Chair; | |
| · | The Compensation Committee members and executive officers of the Company have no business or personal relationship with the advisor; and | |
| · | The Compensation Committee in its discretion determines whether to retain or terminate the advisor. |
External Benchmarks
Towers Watson also provides a customized proxy analysis of similarly sized publicly-traded financial services/banking organizations. In November 2009,organizations designated as the Committee, withCompany’s peer group. Companies have historically been included in the assistance of management and Towers Watson, substantially revised itsCompany’s peer group to assist in the structuring of compensation for its NEOs. The Committee sought to restructure the peer group to (a) reflect the increased size and complexity of the company; (b) remove companies experiencing severe economic distress or in bankruptcy; and (c) to better align the peer group not justbased on their relevance in terms of asset size, but alsobusiness model, products, services and geographic location as compared to identify whatthat of the CommitteeCompany, as well as those the committee deems to be high performing financial institutions. The following revisedWith data gathered from Towers Watson and management, the committee conducts its annual peer group consistingreview to assess the continued relevance of the individual peers. It was determined that primarily due to merger and acquisition activity, 38% of the 2012 peers exceeded more than twice the Company’s asset size at December 31, 2012. As a result, for 2013, the Committee decided to remove three peers (Wintrust Financial, PrivateBancorp and IBERIABANK ) whose asset levels were beyond the relevant scope and added three new peers (Texas Capital Bancshares, Inc., Trustmark Corporation, and National Penn Bancshares, Inc.) who more closely aligned with the Company based on the peer selection criteria outlined above.
The 2013 peer group consisted of the following 16 financial services companies was utilized in 2010:
· | 1st Source Corp. | · | MB Financial, Inc. | · | Texas Capital Bancshares, Inc. |
| · | Chemical Financial Corp. | · | National Penn Bancshares, Inc. | · | Trustmark Corporation |
| · | First Commonwealth Financial Corp. | · | Old National Bancorp | · | WesBanco, Inc. |
| · | FirstMerit Corp. | · | Park National Corporation | · | UMB Financial Corp. |
| · | First Merchants Corp. | · | Prosperity Bancshares, Inc. | ||
| · | First Midwest Bancorp, | · |
The Compensation Committee considers data from these sources to reviewbenchmark the Company’s pay practices and target pay opportunities for the CEO, NEOs and the Board and to evaluate Company performance. Benchmark data is used to determine base salaries, as well as short-term and long-term incentive target opportunities for each NEO. Pay opportunities are established based on median market practices; actual compensation earned is determined by overall performance of the Company so that in years of strong performance, executives may earn higher levels of compensation as compared to executives in similar positions of responsibility at comparative companies. Conversely, in years of below average performance, executives may be paid below average compensation.
We believe that our market review assists us in making executive compensation decisions that are consistent with our objectives, especially those of attracting, retaining and motivating our executive officers.officers and paying for performance. Also, because the current marketplace is the most relevant, when making annual executive compensation decisions, the Compensation Committee does not take into account an individual’s accumulated value from past compensation grants.
2014 Peer Group Changes.As mentioned above, the Compensation Committee has retained conducts an annual peer group review to assess the continued relevance of the individual peers. It was determined that as of September 30, 2013, three of the 2013 peers (FirstMerit Corp, UMB Financial Corp, and Prosperity Bancshares, Inc.) exceeded more than twice the Company’s asset size. As a result, for 2014, the Committee decided to remove these three companies from the peer group and replace with three new peers (Community Bank System Inc., Columbia Banking System Inc. and First Busey Corp.) who more closely aligned with First Financial based on the peer selection criteria.
Company Performance.Towers Watson provides an annual pay for performance analysis using most recent proxy filings that compares the Company’s pay and performance versus the peer group. This analysis demonstrates pay and performance in various perspectives to provide generalfacilitate a broad assessment of how pay relates to performance. The committee reviews and discusses this information typically in the latter half of the year and it serves as one of the many other factors described herein that the committee considers when making pay decisions for the following year.
In determining payouts under the STIP, Company performance is also assessed across specific performance measures and a broader peer group (Component companies of the KBW Regional Bank Index) as described under “2013 Short-term Incentive Plan Design and Payout.” We believe the approach of reviewing pay and performance from multiple perspectives enables well-informed pay decisions both in terms of setting appropriate targets and determining the overall payout levels.
Shareholder Advisory Vote on Executive Compensation.At the annual meeting held on May 28, 2013, the Company’s 2012 executive compensation consulting services toprogram received overwhelming shareholder approval with 95.8% of shareholder votes cast in favor of the Committee and toCompany’s “say on pay” resolution, which was a similar level of support management’s needas the previous year. The subsequent decisions made by the committee, as in prior years, carefully contemplated the substantial support shareholders consistently conveyed for advice and counsel. The consultant also performs specialour executive compensation projects from timeprogram. The committee has and will continue to time as directed byconsider the Committee. The consultant reports to the Compensation Committee Chair. Pursuant to the Compensation Committee’s charter, the Compensation Committee has the power to hire and fire such consultant and engage other advisors.
Evaluation for Excessive Risk.The following outlines the method by which the Company reviews and evaluates compensation policies consistent withand procedures to prevent unnecessary and excessive risks that could threaten the philosophies and objectives discussed earlier.
| · |
| · |
| · | The Compensation Committee |
| · | To further mitigate risk, the committee has responsibility for the annual evaluation and ratification of the Company’s incentive compensation plans. |
In light of the above reviews, the Company and the Compensation Committee have not identified any risks arising from the Company’s compensation policies and practices for the Company’s NEOs and our employees generally that are reasonably likely to have a material adverse effect on the Company. It is both the committee’s and management’s intent to continue to evolve our processes going forward by monitoring regulations and best practices for sound incentive compensation.
Tally Sheets.When making executive compensation decisions, the Compensation Committee reviews tally sheets showing, for each executive officer: (i) targeted value of base pay, annual incentive bonus and equity grants for the current year and each of the past several years; (ii) actual realized value for each of the past several years (the sum of cash received, gains realized from equity awards, and the value of perquisites and other benefits); (iii) the amount of unrealized value from prior equity grants and accumulated deferred compensation; and (iv) the amount the executive could realize upon a change in control or any severance arrangement. Although tally sheets do not drive individual executive compensation decisions, the Compensation Committee uses tally sheets for several purposes. First, it uses tally sheets as a reference so that committee members understand the total compensation being delivered to executives each year and over a multi-year period. Tally sheets also enable the Compensation Committee to validate its strategy of paying a substantial portion of executive compensation in the form of equity by showing amounts realized and unrealized by executives from prior equity grants. In some cases, the Compensation Committee’s review of tally sheets may lead to changes in the NEO’s benefits and perquisites.
Use of Discretion and Other Factors in Pay Decisions.
The exercise of discretion by the Compensation Committee in determining the various elements of compensation is an important feature of the Company’s compensation philosophy. BecauseAnnual Base Salary Decisions.
Base salary for ourThe Compensation Committee historically sets base salaries for named executivesNEOs by utilizing published survey data that is position specific at or near the median of the estimated base salaries. In addition, the Committee,committee, to the extent available, will supplement the survey data with proxy information on base salaries paid by the Peer Group to executive officers with comparable positions. The Committeecommittee will also allow for recognition of each executive’s role, contribution, performance and experience. The Compensation Committee annually reviews base salaries and has increased them as necessary to address competitive increases in median salaries by the Peer Group or to reflect increases in a particular NEO’s responsibilities. In April 2010,2013, the Compensation Committee concluded that in settingincreased NEOs base salaries it would consider, for each NEO, his expertise and responsibilities and increased size and complexity of the Company, and balance that with the state of the economy and financial industry in general. The Compensation Committee noted that the executive team and the board of directors, led by Mr. Davis, continued to effectively respond to the challenges and opportunities facing the Company in 2009 and early 2010, including:
| · | In March 2013, consistent with Company-wide merit practices, base salaries were increased approximately 2.94 - 3.64% for all NEOs with the |
| · |
Name and Principal Position | Base Salary Increase ($) | Base Salary Increase (%) | ||||||
| Claude E. Davis | $ | 55,000 | 9.2 | |||||
| C. Douglas Lefferson | $ | 35,000 | 12.3 | |||||
| J. Franklin Hall | $ | 60,000 | 23.1 | |||||
| Gregory A. Gehlmann | $ | 35,000 | 13.5 | |||||
| Samuel J. Munafo | $ | 25,000 | 10.0 | |||||
The Compensation Committee believes that these modest base pay actions reasonably balanced the need to appropriately compensate and retain top management critical to the Company’s future growth.
Target Compensation Structure Changes. Target compensation levels for our NEOs are set at the beginning of each fiscal year by the Compensation Committee taking into consideration such factors as the board-approved compensation philosophy, program objectives, relevant market data, individual performance and the scope and responsibility of each individual. In general, pay opportunities are targeted at market median levels, with actual compensation realized being higher or lower as determined by overall performance of the Company.
On March 6, 2013 the Compensation Committee established 2013 target compensation levels for its senior executives, including the NEOs. Targets remained relatively unchanged from 2012 levels with the exception of the following promotion-based adjustment:
| · | There were no target incentive changes for NEOs except for Mr. Stollings whose long-term incentive target increased from 40% to 50% as a result of his promotion to CFO. |
The Compensation Committee believes the 2013 target compensation decisions made provide reasonable target pay opportunities in relation to pay offered for comparable positions by financial services companies included in our Peer Group.
2013 Short-term Incentive Awards.
Overview.We believe annual short-term incentives serve as a key mechanism of adjustingto vary pay levels according to reflect company wideCompany-wide short-term performance, thereby ensuring affordabilitylinking executive financial rewards to value delivered to our shareholders. Such incentives are earned and a competitive return to shareholders. Variablepaid annually but only after established threshold corporate performance levels are achieved. To underscore the importance of creating value for our shareholders, NEO short-term incentive pay must be earned annually which downplays entitlement and emphasizes pay for performance and annual incentives will reward executives for annual financial performance and achievement of established corporate objectives. Target annual non-equity incentives typicallypayouts are made by the Compensation Committee at a meeting in the early part of each year. We use onlybased entirely on corporate, rather than individual, performance measures for the NEOs because the NEOs hold positions that have a substantial impact on the achievement of those measures.performance. This approach also suggests that the collective individual performance will result in improved business performance and a favorablefavorably impact on shareholder value. Target Award Opportunities
As mentioned above, target annual short-term incentive opportunities are assigned based onestablished by the Compensation Committee early in the year and are intended to approximate market median levels for similarly positioned roles. Target award levels, by position, andopportunities are expressed as a percentage of actual base salary paid for the performance year for all participants (minimum of 3%). Actual awards may range from 0% to a maximum of 200% of the Total Award Opportunitytarget award opportunity based on financial, risk management and other performance measures.
Performance Categories and Measures
Financial and Operating Performance Measures(equally weighted):
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| · |
| · |
Enterprise Risk Management (ERM) Performance.This category applies only to senior management (including NEOs) participants. Performance and results against ERM objectives are assessed to determine whether the payout factor as calculated for financial performance should be adjusted downward.
Other Considerations.The Compensation Committee may use discretion to adjust the formulaically calculated payout for performance in non-financial areas that may or may not directly affect the Company’s achievement of specific financial metrics for a particular year, but are nevertheless important to long-range growth and the enhancement of shareholder value.
Performance Period. Performance is measured over a 12-month period for all participants (including the NEOs).
Peer Group.Financial results as described above are compared against peers in the KBW Regional Bank Index. This index is made up of approximately 49 regional banks (excluding the Company, which is a component company of the index) located throughout the country that are generally within an asset and market capitalization range comparable to the Company. This peer group is broader than the peer group established for compensation benchmarking purposes as previously described.
Payout Calculation. Minimum performance thresholds exist where overall results in each measure equal to or greater than the 25th percentile of peers and earnings per diluted common share is greater than $0 must be achieved before any payout will be made from the plan. The actual payout is interpolated with a maximum payout of 200% of the target award opportunity for performance at or above the top quartile (75th percentile) of the peer group. In total and for each participant, the STISTIP payout may not exceed 200% of the Target Award Opportunity.
Payout Method. Incentive payments under the securities laws duringSTIP are paid in cash to eligible participants with the Performance Period, or (b) the Committee determines that senior management has taken risks that jeopardize the safety and soundnessexception of the company, the memberspayouts above 100% of senior management (including the NEOs) shall reimburse the company for any award under the STI.
2013 Short-Term Incentive Plan Performance Results
As mentioned earlier, the Compensation Committee consideredapproved the following:
The Compensation Committee believed the negative impact of the fourth quarter charge, which was necessitated by circumstances outside of normal business operations, did not appropriately reflect actual operating results. Therefore the Committee decided to exclude the impact from the STIP calculation for all associates except for the CEO. Mr. Davis recommended to the historical peer group three large cap banks – FITB (Fifth Third Bancorp), KEY (KeyCorp) and HBAN (Huntington Bancshares) – are includedCommittee that his payout follow the plan formula as originally designed without discretionary adjustments, thus resulting in the peer group and had a dramatic effect on the peer group performance for 2010 due to their size. Each was recovering from significantly depressed stock values over the past two years, which magnified their gains in 2010 and resulted in an indexed total return of 47.2%0% payout for the peer group. When these three banks are removed fromCEO.
The Company’s final 2013 results for each equally weighted STIP component, excluding the peer group, the adjusted total return for 2010 was much lower, at 16.8%.
| 2013 Short Term Incentive Plan Results Versus Peers1 | ||||||||||||||||||||
| FFBC Results2 (%) | Peer Median (%) | FFBC Percentile Rank versus Peers3 | Measure Weight (%) | Payout Multiple (%) | ||||||||||||||||
| Return on Assets | 1.01 | 1.04 | 46.9 | 33.33 | 93.8 | |||||||||||||||
| Earnings Per Share Growth Rate4 | (4.90 | ) | 11.34 | 8.0 | 33.33 | 0 | ||||||||||||||
| Efficiency Ratio | 65.08 | 60.36 | 29.0 | 33.33 | 58.0 | |||||||||||||||
| Grand Total | 50.6 | % | ||||||||||||||||||
1Peer performance reflects data for YTD 2013 as of September 30, 2013 for all categories.
2FFBC results exclude the impact of the $22.4 million charge to 2013 fourth quarter earnings announced by the Company on January 22, 2014. This charge was the result of a reference below.
3FFBC percentile rank is calculated assuming that 100th percentile is top performance |
| FFBC | Peer Median | Comparison | |||||||
| Total Shareholder Return | Above Median | ||||||||
- 1-Year Total Return | 29.96 | % | 47.17 | % | |||||
- 1-Year Peer Adjusted Return | 16.80 | % | |||||||
- 1-Year KBW Regional Bank Index Total Ret. | 20.39 | % | |||||||
ROA (YTD 9/30/10) | 0.91 | % | 0.60 | % | Slightly < Top Quartile | ||||
Credit Quality (YTD 9/30/10) | Above Median | ||||||||
- Non-performing assets to Loans | 3.14 | % | 4.28 | % | |||||
- Net Charge Offs to Loans | 1.27 | % | 1.07 | % | |||||
- Reserves to Non-Performing Loans | 81.03 | % | 63.97 | % | |||||
| FFBC | Peer Median | Comparison | |||||||
| Total Shareholder Return | Top Quartile | ||||||||
- 3-Year Total Return | 84.32 | % | (34.09 | )% | |||||
- 3-Year KBW Regional Bank Index Total Ret. | (23.60 | )% | |||||||
| ROA | 2.26 | % | 0.50 | % | Top Quartile | ||||
| Credit Quality | Above Median | ||||||||
- Non-performing assets to Loans | 2.27 | % | 3.58 | % | |||||
- Net Charge Offs to Loans | 0.97 | % | 0.92 | % | |||||
- Reserves to Non-Performing Loans | 118.08 | % | 73.28 | % | |||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||
| First Financial Bancorp | 100.00 | 98.62 | 71.06 | 81.82 | 100.78 | 130.97 | ||||||||||||||||||
| Nasdaq Market Index | 100.00 | 110.33 | 122.06 | 73.48 | 106.60 | 125.79 | ||||||||||||||||||
| KBW Regional Bank Index | 100.00 | 108.56 | 84.71 | 68.99 | 53.72 | 64.68 | ||||||||||||||||||
| Peer Group Index | 100.00 | 112.57 | 75.57 | 40.05 | 33.84 | 49.80 | ||||||||||||||||||
4Represents average of annual earnings per share growth rates for periods listed; peers reporting a loss in any period under comparison are considered to thathave earnings per share growth of other similarly sized institutions. First Financial Bancorp is included in the KBW Regional Bank Index.
Enterprise Risk Management Performance
The table below sets forth the form of payout to our NEOs in 2013.
| NEO Name | 2013 Target STIP % of Base Salary | 2013 Target Payout @ 100% of Target | Actual Results Total Value of Payout (50.6% of Target) 1 | |||||||||
| Claude E. Davis2 | 60 | % | $ | 414,000 | $ | 0 | ||||||
| Anthony M. Stollings | 40 | % | $ | 128,000 | $ | 59,227 | ||||||
| Richard S. Barbercheck | 30 | % | $ | 78,810 | $ | 39,802 | ||||||
| Kevin T. Langford | 40 | % | $ | 128,000 | $ | 59,406 | ||||||
| C. Douglas Lefferson | 40 | % | $ | 140,000 | $ | 70,451 | ||||||
1Actual payout is derived by applying 50.6% payout multiple to actual base salary earned for 2013. 100% target payout amounts are based on strong resultssalary rate at 12/31/2013.
2CEO payout of $0 reflects adherence to plan formula as originally designed with no discretionary adjustments for the FDIC indemnification asset expense as described above.
2013 Long-Term Incentive Plan Design and Awards
The Long Term Incentive Plan (LTIP) is designed for the Company’s top leaders who have a direct and measurable impact on the long-term performance of the Company. In addition to base pay and short-term incentive opportunities, the LTIP is a key component of the total compensation package to attract, motivate and retain top professionals in this category.
Senior managers and determined that 1x target payout was prudent and consistent with our compensation philosophy as well as the goal to return long-term value to our shareholders. In addition, the NEOs received a 15% downward pro rata adjustment due to the company being subject to TARP until February 24, 2010 and the prohibitionkey sales executives of the SEOs not permittedCompany are eligible to participate in any cash incentive compensation.
| NEO Name | 2010 Target STIP % | 2010 Target Payout @ 100% of Target | 2010 Stretch Payout @ 200% of Target | Actual Results 2010 TARP Adjusted Payout (1) | ||||||||||||
| Claude E. Davis | 50 | % | $ | 321,826 | $ | 643,652 | $ | 273,332 | ||||||||
| C. Douglas Lefferson | 40 | % | $ | 126,384 | $ | 252,768 | $ | 107,340 | ||||||||
| J. Franklin Hall | 40 | % | $ | 125,230 | $ | 250,460 | $ | 106,360 | ||||||||
| Gregory A. Gehlmann | 40 | % | $ | 116,384 | $ | 232,768 | $ | 98,847 | ||||||||
| Samuel J. Munafo | 35 | % | $ | 95,240 | $ | 190,480 | $ | 80,889 | ||||||||
Restricted Stock Awards.
Performance-Based Restricted Stock Awards.One-half of Mr. Davis’ 2013 long-term incentive award (24,281 shares) was comprised of performance-based restricted stock that vests after three years only upon the attainment of certain pre-determined performance measures (generally total shareholder return and return on assets). The award is structured such that at the end of the three-year performance period:
| · | No portion of the award may vest if performance against peers in the KBW Regional Bank Index is below the 25th percentile |
| · | Above median performance (60th percentile versus peers) must be achieved in order for 100% of the award to vest |
| · | The award has limited upside potential. The maximum payout is capped at 120% of the initial award amount for performance at or above the 75th percentile. |
| · | 50% of the after-tax shares earned must be held for 24 months or until retirement. |
Targets. In March 2013, the Committee reviewed target compensation levels in the context of relative performance versus peers as well as survey and peer proxy data. Restricted stock was awarded to Messrs. Davis, Stollings, Lefferson, Langford and Barbercheck based on a percentage of base salary (110%, 50%, 70%, 50% and 40%, respectively). The following chart summarizes the grants that we made to our NEOs in 2010 and the alignment of these grants with shareholders returns:
NEO | Grant Date | Number of Shares | Grant Date Fair Value(1) | Market Value at Current Stock Price(2) | |||||||||||
| Claude E. Davis | 4/26/2010 | 32,000 | $ | 653,440 | $ | ||||||||||
| C. Douglas Lefferson | 4/26/2010 | 8,700 | 177,654 | ||||||||||||
| J. Franklin Hall | 4/26/2010 | 8,000 | 163,360 | ||||||||||||
| Gregory A. Gehlmann | 4/26/2010 | 7,200 | 147,024 | ||||||||||||
| Samuel J. Munafo | 4/26/2010 | 6,000 | 122,520 | ||||||||||||
| NEO | Grant Date | Number of Shares 1 | Grant Date Fair Value 2 | |||||||
| Claude E. Davis | 3/6/2013 | 48,562 | $ | 759,024 | ||||||
| Anthony M. Stollings | 3/6/2013 | 9,118 | $ | 142,514 | ||||||
| Richard S. Barbercheck | 3/6/2013 | 6,723 | $ | 105,080 | ||||||
| Kevin T. Langford | 3/6/2013 | 9,118 | $ | 142,514 | ||||||
| C. Douglas Lefferson | 3/6/2013 | 15,675 | $ | 245,000 | ||||||
1 24,281 of the shares awarded to Mr. Davis were in the form of performance-based restricted stock as described above. 2 This is the amount reported in the Grants of Plan-Based Awards table, below (based on a stock price of |
For 2014, 25% of long-term incentive awards granted to Messrs. Stollings, Lefferson, and Langford will be in 2010 do not have any performance triggersthe form of performance-based restricted stock, while 75% of long-term incentive awards for these individuals will be in the form of time-based restricted stock. Mr. Davis’ long-term incentive award will continue to be 50% in the form of time-based restricted stock and will vest over time50% in accordance with the termsperformance-based restricted stock as discusseddescribed above. See “Committee Actions for 2014” for a discussion of actions taken for 2014. Additional information about the restricted stocklong-term incentive grants can be found in the Summary Compensation Table and following tables and footnotes, andas well as the narrative following these tables.
Pay for Performance
Pay versus Key Financial Performance. The STIP’s balanced, key financial measures are intended to drive shareholder value creation and align with the Company’s internal, board-approved business plan. They also serve as a key mechanism to vary pay according to our performance relative to peers. In addition, the STIP can serve as a practical gauge to illustrate the Company’s overall pay-for-performance linkage.
The charts below illustrate how the CEO’s summary compensation table pay, over the past three years compares to the Company’s performance in each of the three STIP measures (Return on Assets, EPS Growth Rate and Efficiency ratio) over the same period as well as to KBW Regional Bank Index median performance.
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Pay versus Total Shareholder Return Performance. It is important to note that peers experienced dramatic declines in total shareholder return (TSR) after 2007 compared to the Company, who significantly outperformed peers during the financial crisis. As shown in the graph below, prior to 2009, TSR levels for the Company and the KBW Regional Bank Index were divergent. In 2009recent years, a reversal of this trend has emerged and returns for both peers and the Company are converging to more normalized levels. The graph below illustrates this trend and compares the five-year cumulative return to shareholders of the Company’s common stock with that of companies that comprise the NASDAQ Composite Index and KBW Regional Bank Index (which are peers under the STIP). The Company is included in the KBW Regional Bank Index. The following table assumes $100 invested on December 31, 2008 in each category and assumes dividends are reinvested.
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Comparison of Five Year Cumulative Total Return Among First Financial Bancorp. approvedBancorp, NASDAQ Composite Index and KBW Regional Bank Index
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |||||||||||||||||||
| First Financial Bancorp | 100.00 | 123.17 | 160.07 | 151.31 | 143.25 | 181.37 | ||||||||||||||||||
| NASDAQ Composite Index | 100.00 | 145.34 | 171.70 | 170.34 | 200.54 | 281.07 | ||||||||||||||||||
| KBW Regional Bank Index | 100.00 | 77.93 | 93.84 | 88.98 | 100.77 | 147.93 | ||||||||||||||||||
Pay versus Key Operating Performance. Strong operating performance demonstrates the 2009 Stock Plan. ThisCompany’s commitment to the long-term health, sustainability and financial solvency of the Company which may not be simultaneously reflected in TSR performance. Therefore, equally important to our holistic view of performance are key operating performance indicators of loan growth, capital, liquidity and credit quality as compared to peers in the graphs below:
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Executive Benefits and Perquisites
Benefits. Executives can participate in group medical and life insurance programs, a percentage match by the Company under the 401(k) Plan and a pension plan which are generally available to all of our employees on a non-discriminatory basis. The benefits serve to protect executives and their families against financial risks associated with illness, disability and death and provide financial security during retirement through a combination of personal savings and Company contributions, taking advantage of tax-deferral opportunities where permitted. Our NEOs are also participants in a life insurance program that insures them for three times their base salary.
Executive Benefits. Our NEOs are eligible for the Supplemental Executive Retirement Plan (“SERP”). The SERP is designed to make up for pension allocations limited by the IRS for highly compensated individuals, so that our NEOs receive the same percentage of compensation funded for retirement as all other employees. Effective January 1, 2014, the composition of the Company’s overall retirement benefit changed. As a result, the Supplemental Executive Retirement Plan benefit was reduced from 9% to 5% of eligible earnings. (See “Executive Supplemental Retirement Plan”).
Mr. Davis participates in the Executive Supplemental Savings Plan which is designed to supplement 401(k) Plan benefits above the IRS statutory limits. Effective January 1, 2014, as a result of the Company’s recent retirement benefit changes, no additional credits will be provided to Mr. Davis under the Executive Supplemental Savings Agreement. (See “Executive Supplemental Savings Agreement”). Additionally Mr. Davis is the only NEO that in the past has utilized the deferred compensation plan (see “Nonqualified Deferred Compensation”).
Other Benefits and Perquisites. In addition, the NEOs are reimbursed for business-related expenses they incur and are reimbursed for club memberships and long-term disability. For 2013, parking benefits paid by the Company were significantly reduced for all employees, including NEOs. Also certain relocation benefits are available for providing new grantsqualifying executives and NEOs receive imputed income for life insurance premiums.
In 2013, the Company offered an executive wealth management benefit through the Wealth Management Group at First Financial Bank. This involved comprehensive financial planning for executives in their personal financial decision making (“Annual Wealth Plan”). Executives utilizing the Annual Wealth Plan are taxed on the value of stock-based incentive compensationsuch benefit.
Finally, biennial (annual if over 50) executive physical examinations are available to eligible employees, includingexecutive senior officers in an effort to ensure the NEOs. continued health of key executives. Management believes that the costs of reimbursement of such expenses and allowances constitute ordinary and necessary business expenses that facilitate job performance and minimize work-related expenses incurred by the NEOs and are not taxed as a personal benefit. We present information about the perquisites received by our NEOs in the “All Other Compensation” column of the Summary Compensation Table and Footnote No. 7 to that table.
Employment Agreements.The Company also maintainshas employment agreements with each of the 1999 Employee Stock Plan, however, no further awards can be granted under the 1999 plan as it expired by its terms on April 26, 2009. The 1999 plan will remainNEOs, except Mr. Langford who received a severance and change in effect with respect to awards already granted under the plan until such awards have been exercised, forfeited, canceled, have vested, expired or otherwise terminatedcontrol agreement in accordance2013. Such agreements, with the termsexception of such grants.
Employment agreements for Messrs. Davis and Lefferson, which were filed as Exhibits to Forms 8-K filed by the Company on January 5, 2012, and January 3, 2011, respectively, remain unchanged as of the date of this proxy filing. In 2013, the Company entered into an Employment Agreement with Mr. Stollings and a Severance and Change in Control Agreement with Mr. Langford, both of which were filed as Exhibits to the Form 8-K filed by the Company on November 1, 2013. Mr. Barbercheck’s agreement was not changed in 2013.
For all NEO agreements, the term is automatically extended for consecutive additional one-year periods unless either party gives at least 90 days written notice prior to a scheduled expiration date that the term will not renew.None of the parties gave notice of non-renewal and therefore the agreements are effective for another year. (See “Other Potential Post-Employment Payments”).
Upon a change in control of the Company, the Compensation Committee determined that it wouldterm of the agreements will be for two years from the completion of the change-in-control transaction except for the agreements for Mr. Langford, which has a term of one year, and Mr. Barbercheck which does not address a change in control of the Company. As a result, Messrs. Davis, Lefferson, and Stollings will receive severance in the best interestevent they are terminated without cause (or terminated for good reason) in the first two years following a change-in-control transaction. Mr. Langford will receive severance in the event he is terminated without cause (or terminated for good reason) in the first year following a change-in-control transaction. Mr. Barbercheck’s agreement does not provide for the payment of severance in the event of a change in control.
Pursuant to the agreements, each of the Company and its shareholdersexecutives will continue to serve in the position that the executive held prior to entering into the agreement. The agreements provide incentivethat each executive will be entitled to receive an annual base salary at the NEOsrate applicable prior to remain withentering into the Company and complete the integration process due to our rapid growth, provide stability as the Company executes its strategic plan, and to pursue potential new growth opportunities (if presented) that will drive long-term value creation for the Company’s shareholders.agreement. In addition, the Committee was concerned that NEOs couldeach executive will be recruited away from the Company dueeligible to the executive team’s demonstrated success during a difficult economic periodbe awarded an annual short-term bonus and success in acquiring and integrating the 2009 transactions.
The agreements provide certain benefits to the executives if the Company terminates the executive’s employment without “cause” or the executive resigns his employment with “good reason” (as such terms are defined in the agreements). Upon such a termination of employment, the executive would receive the following payments and benefits: (1) earned and unpaid base salary and vacation pay through the date of termination; (2) continued payment of base salary for 24 months; (3) an amount equal to two times the executive’s target bonus amount; (4) outplacement assistance at the Company’s expense (at a cost of up to 5% of the executive’s base salary); (5) up to twelve months of COBRA premium payment contributions from the Company; and (6) other benefits to which the executive is entitled under the terms of the Company’s benefit plans (other than severance benefits). The severance payments and benefits are subject to the executive’s execution and non-revocation of a release of claims against the Company and its affiliates and continued compliance with the restrictive covenants described below.
“Good Reason” in the agreements for Messrs. Davis, Stollings, and Lefferson is defined as the occurrence, without the NEO’s consent, of: (a) a significant reduction in the NEO’s base salary, except for any decrease that is generally applicable to other similarly situated senior executives of the Company; (b) the failure of the Company to pay or provide to the NEO when due any material amount of compensation or material benefit that is required to be paid or provided under this agreement, after written notice of such purported failure is provided to the Company by the NEO and the Company is given a reasonable opportunity to cure such failure; (c) a significant reduction in the NEO’s authority or responsibilities as set in the agreement; or (d) the failure of the Company to obtain the written agreement of any successor to the Company or the business of the Company to assume the agreement (solely to the extent such assumption does not occur by operation of law).
“Good Reason” in the agreement for Mr. Langford is defined as the occurrence, without the NEO’s consent, of: (a) the failure of the Company to pay or provide to the NEO when due any material amount of compensation or material benefit that is required to be paid or provided under this agreement, after written notice of such purported failure is provided to the Company by the NEO and the Company is given a reasonable opportunity to cure such failure; (b) a significant reduction in the NEO’s authority or responsibilities as set in the agreement; or (c) the failure of the Company to obtain the written agreement of any successor to the Company or the business of the Company to assume the agreement (solely to the extent such assumption does not occur by operation of law).
“Good Reason” in the agreement for Mr. Barbercheck is defined as the occurrence, without the NEO’s consent, of: (a) a significant reduction in the NEO’s base salary, except for any decrease that is generally applicable to other similarly situated senior executives of the Company; or (b) a significant reduction in the NEO’s authority or responsibilities as set in the agreement.
If during the term of the agreement, the NEO's employment is terminated by reason of his death or long-term disability, by the Company for cause (as defined in the agreement) or voluntarily by the NEO for any reason other than for good reason, the Company's obligations to the NEO is limited to the following: (1) the payment of the accrued obligations; and (2) the timely payment or provision of the other benefits. The accrued obligations shall be paid to the NEO or his estate or beneficiary in the event of his/her death, as applicable, in a material misstatementlump sum in cash within thirty (30) days of the financialsdate of termination.
The agreements provide that, in the event that any of the payments or benefits provided under the agreements or otherwise would constitute an “excess parachute payment” as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the payments or benefits under the agreements will be reduced to the maximum level that would not result in an excise tax under Section 4999 of the Code, if risks are taken that are not well-managed and threatensuch reduction would cause the viabilityexecutive to retain an after-tax amount in excess of what would be retained if no reduction were made.
Under the agreements, each executive is restricted from revealing confidential information of the Company and disparaging the Company. In addition, for six months (one year for Messrs. Davis and Barbercheck) following termination of employment (other than upon termination for cause for the executives other than Mr. Davis), the executive may not compete with the Company and, for two years (one year for Mr. Barbercheck) following termination of employment, the executive may not solicit the Company’s clients or solicit or hire the Company’s employees.
The agreements for Messrs. Davis, Stollings and Langford are designed to preserve the Company’s ability to deduct compensation payable under the Key Executive Short-Term Incentive Plan (“STIP”) to satisfy the requirements of performance-based compensation under Internal Revenue Code Section 162(m).
The STIP bonus payable to Messrs. Davis, Stollings and Langford upon a qualifying termination will be calculated as determined bytwo times the Boardaverage of Directors.
Name and Principal Position | Retention Bonus to be Paid Over 1½ Years ($)(1) | Retention Restricted Stock Grant (#)(2) | Value of Shares of Retention Restricted Stock ($)(3) | |||||||||
| Claude E. Davis | $ | 850,000 | 13,000 | $ | 265,460 | |||||||
| C. Douglas Lefferson | $ | 250,000 | 2,700 | $ | 55,134 | |||||||
| J. Franklin Hall | $ | 275,000 | 1,400 | $ | 28,588 | |||||||
| Gregory A. Gehlmann | $ | 225,000 | 1,300 | $ | 26,546 | |||||||
| Samuel J. Munafo | $ | 130,000 | 500 | $ | 10,210 | |||||||
Other Guidelines and Procedures Affecting Executive Compensation
We consider the tax effects of various forms of compensation and the potential for excise taxes to be imposed on our NEOs which might have the effect of frustrating the purpose(s) of such compensation. We consider several provisions of the Internal Revenue Code of 1986, as amended (the “Code”).
Section 162(m).The Compensation Committee has reviewed the qualifying compensation regulations issued by the Internal Revenue ServiceIRS under Section 162(m) of the Code, which provide that no deduction is allowed for applicable employee remuneration paid by a publicly held corporation to its CEO or any of its other four highest paid officers, excluding the principal financial officer, to the extent that the remuneration paid to such employees exceeds $1.0 million for the applicable taxable year, unless certain conditions are met. Compensation pursuant to certain stock option plans and other performance-based compensation may be excluded from the Section 162(m). Other than with respect to Mr. Davis, during 2010, First Financial believes that compensation to covered employees did not exceed the $1.0 million limit. While in general the Compensation Committee attempts to design its compensatory arrangements to preserve the deductibility of executive compensation, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers. The Company believes that shareholders’ interests are best served if the Compensation Committee’s discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses. Neither First Financial nor any of its subsidiaries currently has a policy requiring that compensation paid to a covered officer be deductible under Section 162(m). The Board, of Directors, however, does carefully consider the after-tax cost and value to First Financial and its subsidiaries of all compensation.
It is First Financial’sthe Company’s position that stock options awarded under certain of its stock option plans including the 2009 Stock Plan and the 1999 Stock Plan, will not count toward the Section 162(m) limit. Restricted stock grants that are not performance based are not, however, treated as exempt from the calculation. AmountsFurthermore, amounts previously deferred by executives under the Deferred Compensation Plan will not count toward the Section 162(m) limit.
In 2010,2013, the Company paid an aggregate of approximately $______$643,526 in compensation to its NEOs in excess of the $500,000applicable individual deduction limit,limits (all of which was paid to the CEO), thereby foregoing approximately $______$225,234 in aggregate tax deductions related to named executive officerNEO compensation, calculated at a 35% corporate tax rate. Based on the Company’s 20102013 income before taxes of $_____approximately $67.6 million, the amount of deduction lost represents approximately ____%0.33% of such income. While the Compensation Committee believes the tax-deductibility of executive compensation is important, it was outweighed for 20102013 executive compensation purposes by the critical importance to the Company’s future success to provide competitive pay to the named executives and in a form and manner that would help ensure their retention and motivate them for continued contributions to the Company’s success. In making the determination, the Compensation Committee balanced the one-time loss of a short-term tax benefit provided by this deduction for the 20102013 fiscal year against the long-term benefit to the Company and its stockholdersshareholders of keeping a talented management team intact and securing their on-goingongoing services for the future.
The Short-Term Incentive Plan, approved by shareholders and 4999.
Sections 280G.Effective January 1, 2011, we no longer provide for a 280G gross-up to our NEOs. See “- NEO Employment Agreements – NEO Employment Agreements Effective January 1, 2011.”
Section 409A.
Section 409A generally governs the form and timing of nonqualified deferred compensation payments. Section 409A imposes sanctions on participants in nonqualified deferred compensation plans that fail to comply with Section 409A rules, including accelerated income inclusion, an additional 20% income tax (in addition to ordinary income tax) and an interest penalty. We have amended applicable agreements, arrangements and plans to comply with Section 409A or to qualify for an exemption from Section 409A.Grants of Stock-Based Compensation.
The Compensation Committee approves all grants of stock-based compensation to the CEOStock-Based Compensation—Procedures Regarding Timing and Pricing of Grants.
Our policy is to make grants of equity-based compensation only at current market prices. We set the exercise price of stock options at the closing stock price on the date of grant, and do not grant “in-the-money” options or options with exercise prices below market value on the date of grant. Absent special circumstances, it is our policy to make the majority of such grants atWe try to make equity basedequity-based grants and stock option grants at times when they will not be influenced by scheduled releases of information. We do not otherwise time or plan the release of material, non-public information for the purpose of affecting the value of executive compensation. Similarly, we do not set the grant date of stock options to new executives in coordination with the release of material non-public information and, instead, these grants primarily have grant dates corresponding to regularly scheduled meetings of Compensation Committee in the early part of the fiscal year.
Clawbacks.For awards made prior to Incentive Compensation2012, in the event: (a) the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a Resultresult of Financial Statement Restatements.
For awards made in and after 2012, any bonus, commission, or other compensation, including but not limited to payments made under the STIP or stock grants may be subject to recovery, or “clawback” by the Company for a period of three years (or such longer period as may be required by law) if the payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, or as otherwise required by law. In addition, all compensation plans are automatically amended as necessary to comply with the requirements and or limitations under laws, rules, regulations, or regulatory agreements up to and including a revocation of this award.
Share Ownership and Share Retention Guidelines.In 2012 the Company established stock ownership and retention guidelines for NEOs effective as of the date of the 2012 shareholder meeting. The Committee’s practice has beenCompany requires the CEO to consider adjusting futureown Company stock equal to at least three times the CEO’s current base salary or 125,000 shares (whichever is less) within 5 years of first becoming the CEO of the Company. The CEO is currently in compliance with this requirement. In addition, with respect to awards after the 2012 shareholder meeting, NEOs are required to hold 50% of after-tax, vested restricted stock for twenty-four months or recovering past awardsthrough retirement, whichever is earlier for grants awarded on or after the 2012 shareholder meeting date. Other than due to death, disability or retirement, any applicable holding period(s) remain in effect in the event of a material restatement of our financial results. As a result ofNEO’s departure from the passage of TARP and our participation in the CPP, the Committee strengthened this recoupment policy in 2009. TARP requires us to recover any bonus or incentive compensation paid to an NEO or any of the next 20 most highly-compensated employees based on statements of earnings, gains, or other criteria which prove to be materially inaccurate. The 2010 Short Term Incentive Plan and the retention bonus awarded to the NEOs in 2010 include clawback provisions.
Hedging orPledging.The Company considers it improper and inappropriate for each executive officer: (i) targeted value of base pay, annual incentive bonus and equity grants for the current year and each of the past several years; (ii) actual realized value for each of the past several years (the sum of cash received, gains realized from equity awards, and the value of perquisites and other benefits); (iii) the amount of unrealized value from prior equity grants and accumulated deferred compensation; and (iv) the amount the executive could realize upon a changeinsiders to engage in controlshort-term or any severance arrangement, which for First Financial includes only amounts from the acceleration of equity award vesting. Although tally sheets do not drive individual executive compensation decisions, the Compensation Committee uses tally sheets for several purposes. First, it uses tally sheets as a reference so that Committee members understand the total compensation being delivered to executives each year and over a multi-year period. Tally sheets also enable the Compensation Committee to validate its strategy of paying a substantial portion of executive compensationspeculative transactions in the form of equity, by showing amounts realized and unrealized by executives from prior equity grants. In some cases,Company's securities. It therefore is the Compensation Committee’s review of tally sheetsCompany's policy that such individuals may lead to changesnot engage in the named executive officer’s benefits and perquisites.
The table sets forth the annual and long-term compensation of the payments or benefits provided under the agreements or otherwise would constitute an “excess parachute payment” (as definedour Chief Executive Officer, our current and former Chief Financial Officers and three of our other most highly compensated executive officers in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), the payments or benefits under the agreements will be reduced to the maximum level that would not result in an excise tax under Section 4999 of the Code, if such reduction would cause the executive to retain an after-tax amount in excess of what would be retained if no reduction were made. The prior agreements with each of the executives (other than Messrs. Munafo and Gehlmann) provided for a tax gross-up for any excise tax and related taxes on change of control payments and benefits that were considered “excess parachute payments” under the Code.
In the column “Salary,” we disclose the amount of base salary paid to the NEOs during the year. In the columns “Stock Awards” and “Option Awards,” SEC regulations require us to disclose the cost we recognize for financial statement reporting purposes. Please refer to note 20Note 19 of our consolidated financial statements in our annual report for the years ended December 31, 2010, 2009 and 2008Annual Report for a discussion of the assumptions related to the calculation of such values. We disclose such expense without reduction for estimated forfeitures (as we do for financial reporting purposes). These amounts reflect the company’sCompany’s accounting expense and do not correspond to the actual value that willmay be realized by the NEOs
In the column “Non-Equity Incentive Plan Compensation,” we disclose the dollar value of all earnings for services performed during the year pursuant to awards under our non-equity short-term incentive plan,Short-Term Incentive Plan, unless disclosed in the “Bonus” column. We determine whether to include an award with respect to a particular year based on whether the relevant performance measurement period ended during the year. For example, we make annual payments under our short-term incentive plan based upon our financial results measured as of December 31 of each year. Accordingly, the amount we report for short-term incentive plan corresponds to the year for which the NEO earned the award even though we did not pay the award until after the end of such year.
In the column “Change in Pension Value and Nonqualified Deferred Compensation Earnings,” we disclose the sum of the dollar value ofof: (1) the aggregate change in the actuarial present value of each NEO’s benefit under all defined benefit and actuarial pension plans (including supplemental plans) induring the year, if positive; and (2) any above-market or preferential earnings on nonqualified deferred compensation, including benefits in defined contribution plans. The dividends we pay on restricted stock are equal to the dividends we pay to all other holders of our common stock.shares. Therefore, they are not “above-market”“above market” under SEC regulations, and we report these in the “All Other Compensation” column in the Summary Compensation Table.
In the column “All Other Compensation,” we disclose the sum of the dollar value of perquisites and other personal benefits, or property; and all “gross-ups” or other amounts reimbursed (if any) during the year for the payment of taxes.
The following Summary Compensation Table sets forth the compensation of Company’s Principal Executive Officer, Principal Financial Officerprincipal executive officer, principal financial officer and the next three highest compensated executive officers. All of the executive officers named in the Summary Compensation Table are referred to hereafter(Named Executive Officers or “NEOs”), as well as the “NEOs” for fiscal years 2010, 2009 and 2008.
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | |||||||||||||||||||||||||||
| Claude E. Davis | 2013 | 686,154 | — | 759,024 | — | — | 121,840 | 151,124 | 1,718,142 | |||||||||||||||||||||||||||
| President & CEO | 2012 | 667,539 | — | 737,656 | — | 344,851 | 137,837 | 107,188 | 1,995,071 | |||||||||||||||||||||||||||
| 2011 | 650,000 | 340,000 | 880,448 | — | 325,000 | 139,570 | 94,435 | 2,429,453 | ||||||||||||||||||||||||||||
| Anthony M. Stollings (8) | 2013 | 292,625 | — | 142,514 | — | 59,227 | 31,544 | 24,780 | 550,690 | |||||||||||||||||||||||||||
| EVP, Chief Financial Officer and Chief Administrative Officer | ||||||||||||||||||||||||||||||||||||
| Richard S. Barbercheck | 2013 | 262,201 | — | 105,080 | — | 39,802 | 19,275 | 88,902 | 515,260 | |||||||||||||||||||||||||||
| EVP, Chief | ||||||||||||||||||||||||||||||||||||
| Credit Officer | ||||||||||||||||||||||||||||||||||||
| Kevin T. Langford | 2013 | 293,510 | — | 142,514 | — | 59,406 | 26,296 | 25,381 | 547,107 | |||||||||||||||||||||||||||
| Pres. Consumer | 2012 | 273,154 | 16,875 | 138,416 | — | 94,074 | 43,293 | 18,031 | 583,843 | |||||||||||||||||||||||||||
| Banking and Pres. Western Markets | ||||||||||||||||||||||||||||||||||||
| C. Douglas Lefferson | 2013 | 348,077 | — | 245,000 | — | 70,451 | 0 | 40,611 | 704,139 | |||||||||||||||||||||||||||
| Pres. Comml. | 2012 | 337,538 | — | 238,008 | — | 116,248 | 147,072 | 28,014 | 866,880 | |||||||||||||||||||||||||||
| Banking & Wealth Mgt. and Pres. Eastern Markets | 2011 | 320,000 | 100,000 | 258,285 | — | 128,000 | 219,820 | 19,169 | 1,045,274 | |||||||||||||||||||||||||||
| J. Franklin Hall(8) | 2013 | 135,173 | — | — | — | 0 | 567,857 | 703,030 | ||||||||||||||||||||||||||||
| Former Chief | 2012 | 328,768 | — | 199,184 | — | 113,228 | 58,788 | 28,677 | 728,645 | |||||||||||||||||||||||||||
| Financial Officer | 2011 | 320,000 | 110,000 | 258,285 | — | 128,000 | 79,671 | 21,815 | 917,771 | |||||||||||||||||||||||||||
| (1) | The dollar value of base salary (cash and non-cash) earned during the fiscal year. |
| (2) | The dollar value of bonus (cash and non-cash) earned during the fiscal year. |
| (3) | Includes long-term restricted stock incentive amounts both time- and performance-based awarded during the year shown. For |
| (4) |
| (5) | The dollar value of all earnings for services performed during the fiscal year pursuant to awards under non-equity incentive plans |
| (6) | The amounts in this column represent the annual net increase in the present value of accumulated benefits under the SERP and the Pension Plan for the years ended December 31, |
| (7) | All other compensation for the year that could not properly be reported in any other column. The specific elements are discussed below. The “Other” category in the table below includes (where applicable): | |
| (8) | J. Franklin Hall served as the Company’s Executive Vice President and Chief Financial Officer until January 17, 2013 and continued as a non-executive employee of the Company |
2013
| Dividends on | ||||||||||||||||||||
| Unvested | ||||||||||||||||||||
| Stock and | ||||||||||||||||||||
| Company | Accrued | |||||||||||||||||||
| Match | Imputed | Dividends on | ||||||||||||||||||
| Under | Income | Vested | ||||||||||||||||||
| 401 (k) | Split-Dollar | Restricted | ||||||||||||||||||
| Name | Plan | Insurance | Stock | Other | Total | |||||||||||||||
| Davis | $ | 10,200 | $ | 4,941 | $ | 94,610 | $ | 41,374 | $ | 151,124 | ||||||||||
| Stollings | 10,200 | 3,063 | 9,859 | 1,658 | 24,780 | |||||||||||||||
| Barbercheck | 10,200 | 2,417 | 13,148 | 63,136 | (1) | 88,902 | ||||||||||||||
| Langford | 10,200 | 1,019 | 12,589 | 1,573 | 25,381 | |||||||||||||||
| Lefferson | 10,200 | 1,667 | 27,068 | 1,676 | 40,611 | |||||||||||||||
| Hall | 10,200 | 415 | 24,297 | 532,945 | (2) | 567,857 | ||||||||||||||
2012
| Dividends on | ||||||||||||||||||||
| Unvested | ||||||||||||||||||||
| Stock and | ||||||||||||||||||||
| Company | Accrued | |||||||||||||||||||
| Match | Imputed | Dividends on | ||||||||||||||||||
| Under | Income | Vested | ||||||||||||||||||
| 401 (k) | Split-Dollar | Restricted | ||||||||||||||||||
| Name | Plan | Insurance | Stock | Other | Total | |||||||||||||||
| Davis | $ | 10,000 | $ | 4,431 | $ | 49,521 | $ | 43,236 | $ | 107,188 | ||||||||||
| Lefferson | 10,000 | 1,667 | 15,445 | 902 | 28,014 | |||||||||||||||
| Hall | 10,000 | 993 | 13,880 | 3,804 | 28,677 | |||||||||||||||
| Langford | 10,000 | 932 | 6,402 | 697 | 18,031 | |||||||||||||||
| 54 |
| 2010 | Company | |||||||||||||||||||||||
| Match | Imputed | Dividends on | ||||||||||||||||||||||
| Under | Income | Unvested | ||||||||||||||||||||||
| Automobile | 401(k) | Split Dollar | Restricted | |||||||||||||||||||||
| Name | Allowance | Plan | Insurance | Stock | Other | Total | ||||||||||||||||||
| Mr. Davis | $ | 3,115 | $ | 9,800 | $ | 1,570 | $ | 22,217 | $ | 47,463 | $ | 84,165 | ||||||||||||
| Mr. Lefferson | 3,115 | 9,800 | 596 | 8,010 | 244 | 21,765 | ||||||||||||||||||
| Mr. Hall | 2,077 | 9,800 | 450 | 6,724 | 4,293 | 23,344 | ||||||||||||||||||
| Mr. Munafo | 2,908 | 9,800 | 1,368 | 6,598 | 223 | 20,897 | ||||||||||||||||||
| Mr. Gehlmann | 2,077 | 9,800 | 676 | 6,689 | 1,330 | 20,572 | ||||||||||||||||||
| Company | ||||||||||||||||||||||||
| Match | Imputed | Dividends on | ||||||||||||||||||||||
| Under | Income | Unvested | ||||||||||||||||||||||
| Automobile | 401(k) | Split Dollar | Restricted | |||||||||||||||||||||
| Name | Allowance | Plan | Insurance | Stock | Other | Total | ||||||||||||||||||
| Mr. Davis | $ | 9,000 | $ | 9,800 | $ | 1,351 | $ | 32,039 | 28,786 | $ | 80,976 | |||||||||||||
| Mr. Lefferson | 9,000 | 9,800 | 493 | 9,334 | 2,078 | 30,705 | ||||||||||||||||||
| Mr. Hall | 6,000 | 9,800 | 349 | 6,949 | 4,482 | 27,580 | ||||||||||||||||||
| Mr. Munafo | 8,400 | 9,800 | 1,163 | 8,842 | 928 | 29,133 | ||||||||||||||||||
| Mr. Gehlmann | 6,000 | 9,800 | 561 | 6,915 | 2,796 | 26,072 | ||||||||||||||||||
| Company | ||||||||||||||||||||||||
| Match | Imputed | Dividends on | ||||||||||||||||||||||
| Under | Income | Unvested | ||||||||||||||||||||||
| Automobile | 401(k) | Split Dollar | Restricted | |||||||||||||||||||||
| Name | Allowance | Plan | Insurance | Stock | Other | Total | ||||||||||||||||||
| Mr. Davis | $ | 8,991 | $ | 9,200 | $ | 1,102 | $ | 49,733 | $ | 31,788 | $ | 100,814 | ||||||||||||
| Mr. Lefferson | 8,991 | 9,200 | 461 | 13,081 | 3,827 | 35,561 | ||||||||||||||||||
| Mr. Hall | 6,000 | 9,200 | 320 | 8,712 | 9,126 | 33,394 | ||||||||||||||||||
| Mr. Munafo | 8,400 | 9,200 | 1,086 | 10,874 | 928 | 30,488 | ||||||||||||||||||
| Mr. Gehlmann | 6,000 | 9,200 | 524 | 8,104 | 3,810 | 27,639 | ||||||||||||||||||
2011
| Company Match | Imputed | Dividends on | ||||||||||||||||||
| Under | Income | Unvested | ||||||||||||||||||
| 401 (k) | Split-Dollar | Restricted | ||||||||||||||||||
| Name | Plan | Insurance | Stock | Other | Total | |||||||||||||||
| Davis | $ | 9,800 | $ | 1,520 | $ | 24,276 | $ | 58,839 | $ | 94,435 | ||||||||||
| Lefferson | 9,800 | 546 | 8,621 | 202 | 19,169 | |||||||||||||||
| Hall | 9,800 | 400 | 7,416 | 4,199 | 21,815 | |||||||||||||||
| (1) | Includes relocation bonus of $50,000 and taxable moving benefit of $11,498. |
| (2) | Includes severance pay of $429,103; a gross SERP Distribution (pre-tax portion) of $97,783; and severance medical benefit of $5,765. |
The following table shows all individual grants of stock awards to the NEOs of the Company during the fiscal year ended December 31, 2010.2013. Total value is computed utilizing the grant date market value for restricted stock awards and the grant date fair value in accordance with FAS 123(R)ASC Topic 718 on stock option awards.
Estimated Future Payouts Under
Non-Equity Incentive Plans (1) (6)
| Name | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | All Other Stock Awards: No. of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards (4) | Grant Date Fair Value of Stock and Option Awards (5) | |||||||||||||||||||||||
| Davis | n/a 4/26/10 4/26/10 | STIP Res St. Res St. | 0 | 325,000 | 650,000 | 32,000 13,000 | (2) (3) | -0- | N/A | $ | N/A 653,440 265,460 | |||||||||||||||||||||
| Lefferson | n/a 4/26/10 4/26/10 | STIP Res St. Res St. | 0 | 128,000 | 256,000 | 8,700 2,700 | (2) (3) | -0- | N/A | N/A 177,654 55,134 | ||||||||||||||||||||||
| Hall | n/a 4/26/10 4/26/10 | STIP Res St. Res St. | 0 | 128,000 | 256,000 | 8,000 1,400 | (2) (3) | -0- | N/A | N/A 163,360 28,588 | ||||||||||||||||||||||
| Gehlmann | n/a 4/26/10 4/26/10 | STIP Res St. Res St. | 0 | 118,000 | 236,000 | 7,200 1,300 | (2) (3) | -0- | N/A | N/A 147,024 26,546 | ||||||||||||||||||||||
| Munafo | n/a 4/26/10 4/26/10 | STIP Res St. Res St. | 0 | 96,250 | 192,500 | 6,000 500 | (2) (3) | -0- | N/A | N/A 122,520 10,210 | ||||||||||||||||||||||
| Name | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | All Other Stock Awards: No. of Shares of Stock or Units (#) (2) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards (3) | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||
| Claude E. Davis | n/a | STIP | 0 | 414,000 | 828,000 | |||||||||||||||||||||||||||
| -0- | N/A | N/A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | 24,281 | $ | 379,512 | ||||||||||||||||||||||||||||
| 03/06/2013 | Perf-based Res St. | 24,281 | 379,512 | |||||||||||||||||||||||||||||
| Anthony M. Stollings | n/a | STIP | 0 | 128,000 | 256,000 | |||||||||||||||||||||||||||
| -0- | N/A | N/A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | 9,118 | 142,514 | |||||||||||||||||||||||||||||
| Richard S. Barbercheck | n/a STIP | 0 | 78,810 | 157,620 | ||||||||||||||||||||||||||||
| -0- | N/A | N/A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | 0 | 6,723 | 105,080 | ||||||||||||||||||||||||||||
| Kevin T. Langford | n/a | STIP | 0 | 128,000 | 256,000 | |||||||||||||||||||||||||||
| -0- | N/A | N/A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | 9,118 | 142,514 | |||||||||||||||||||||||||||||
| C. Douglas Lefferson | n/a | STIP | 0 | 140,000 | 280,000 | |||||||||||||||||||||||||||
| -0- | N\A | N\A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | 15,675 | 245,000 | |||||||||||||||||||||||||||||
| J. Franklin Hall | n/a | STIP | ||||||||||||||||||||||||||||||
| -0- | N/A | N/A | ||||||||||||||||||||||||||||||
| 03/06/2013 | Res St. | -0- | — | |||||||||||||||||||||||||||||
| 1. |
| 2. | Restricted shares vest over a three-year period beginning |
| 3. |
| No options were granted in |
The amounts of the estimated future payouts under the non-equity incentive plans column represent the opportunities in the event the Company meets certain targets pursuant to the terms of the Analysis. |
The following table represents stock options and restricted stock awards outstanding for each NEO as of December 31, 2010.2013. All stock options and restricted awards have been adjusted for stock dividends and stock splits. The closing per share price of the Company’s stock on the last trading date of the fiscal year was $18.48.
| Option Awards | Restricted Stock Awards | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||||||||||||
| Claude E. Davis | 93,385 | $ | 1,725,755 | ||||||||||||||||||
| 50,000 | 0 | $ | 17.19 | 10/01/2014 | |||||||||||||||||
| 84,100 | 0 | $ | 17.51 | 04/18/2015 | |||||||||||||||||
| 103,900 | 0 | $ | 16.02 | 04/24/2016 | |||||||||||||||||
| 83,774 | 27,926 | (2) | $ | 14.90 | 04/30/2017 | ||||||||||||||||
| 156,799 | 156,801 | (3) | $ | 11.64 | 02/14/2018 | ||||||||||||||||
| C. Douglas Lefferson | 29,618 | $ | 547,341 | ||||||||||||||||||
| 10,000 | 0 | $ | 17.20 | 01/17/2012 | |||||||||||||||||
| 10,000 | 0 | $ | 16.58 | 01/22/2013 | |||||||||||||||||
| 2,500 | 0 | $ | 17.09 | 01/21/2014 | |||||||||||||||||
| 25,000 | 0 | $ | 17.51 | 04/18/2015 | |||||||||||||||||
| 25,500 | 0 | $ | 16.02 | 04/24/2016 | |||||||||||||||||
| 21,149 | 7,051 | (2) | $ | 14.90 | 04/30/2017 | ||||||||||||||||
| 35,999 | 36,001 | (3) | $ | 11.64 | 02/14/2018 | ||||||||||||||||
| J. Franklin Hall | 24,978 | $ | 461,593 | ||||||||||||||||||
| 5,000 | 0 | $ | 17.20 | 01/17/2012 | |||||||||||||||||
| 10,000 | 0 | $ | 16.58 | 01/22/2013 | |||||||||||||||||
| 2,500 | 0 | $ | 17.09 | 01/21/2014 | |||||||||||||||||
| 14,300 | 0 | $ | 17.51 | 04/18/2015 | |||||||||||||||||
| 17,300 | 0 | $ | 16.02 | 04/24/2016 | |||||||||||||||||
| 14,399 | 4,801 | (2) | $ | 14.90 | 04/30/2017 | ||||||||||||||||
| 26,249 | 26,251 | (3) | $ | 11.64 | 02/14/2018 | ||||||||||||||||
| Option Awards(6) | Restricted Stock Awards | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date(5) | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | |||||||||||||||
| Samuel J. Munafo | 21,581 | $ | 398,817 | ||||||||||||||||||
| 5,000 | 0 | $ | 17.20 | 01/17/2012 | |||||||||||||||||
| 5,000 | 0 | $ | 16.58 | 01/22/2013 | |||||||||||||||||
| 2,500 | 0 | $ | 17.09 | 01/21/2014 | |||||||||||||||||
| 12,000 | 0 | $ | 17.51 | 04/18/2015 | |||||||||||||||||
| 17,700 | 0 | $ | 16.02 | 04/24/2016 | |||||||||||||||||
| 14,699 | 4,901 | (2) | $ | 14.90 | 04/30/2017 | ||||||||||||||||
| 25,249 | 25,251 | (3) | $ | 11.64 | 02/14/2018 | ||||||||||||||||
| Gregory A. Gehlmann | 24,028 | $ | 444,037 | ||||||||||||||||||
| 11,400 | 0 | $ | 18.63 | 06/21/2015 | |||||||||||||||||
| 16,500 | 0 | $ | 16.02 | 04/24/2016 | |||||||||||||||||
| 14,699 | 4,901 | (2) | $ | 14.90 | 04/30/2017 | ||||||||||||||||
| 26,249 | 26,251 | (3) | $ | 11.64 | 02/14/2018 | ||||||||||||||||
| Option Awards | Restricted Stock Awards | |||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (1) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||||||
| Claude E. Davis | 50,000 | 0 | ||||||||||||||||||||
| 84,100 | 0 | $ | 17.19 | 10/01/2014 | 99,053 | $ | 1,726,494 | |||||||||||||||
| 103,900 | 0 | $ | 17.51 | 04/18/2015 | $ | |||||||||||||||||
| $ | 16.02 | 04/24/2016 | ||||||||||||||||||||
| Anthony M. Stollings | 5,000 | 0 | ||||||||||||||||||||
| 7,000 | 0 | $ | 16.61 | 12/29/2016 | 16,290 | $ | 283,935 | |||||||||||||||
| 28,000 | 0 | $ | 14.90 | 04/30/2017 | ||||||||||||||||||
| $ | 11.64 | 02/14/2018 | ||||||||||||||||||||
| Richard | ||||||||||||||||||||||
| Barbercheck | ||||||||||||||||||||||
| Kevin T. Langford | 2,776 | 0 | 14,499 | $ | 252,718 | |||||||||||||||||
| 6,301 | 0 | $ | 16.02 | 04/24/2016 | 18,614 | $ | 324,442 | |||||||||||||||
| 12,755 | 0 | $ | 14.90 | 04/30/2017 | ||||||||||||||||||
| $ | 11.64 | 02/14/2018 | ||||||||||||||||||||
| C. Douglas Lefferson | 2,500 | 0 | ||||||||||||||||||||
| 25,000 | 0 | $ | 17.09 | 01/21/2014 | 31,635 | $ | 551,398 | |||||||||||||||
| 25,500 | 0 | $ | 17.51 | 04/18/2015 | ||||||||||||||||||
| 28,200 | 0 | $ | 16.02 | 04/24/2016 | ||||||||||||||||||
| 58,409 | 0 | $ | 14.90 | 04/30/2017 | ||||||||||||||||||
| $ | 11.64 | 02/14/2018 | ||||||||||||||||||||
| J. Franklin Hall | N/A | 0 | N/A | |||||||||||||||||||
(1) Restricted shares vestsvest according to the following schedule:
| Vesting Date | Davis | Lefferson | Hall | Munafo | Gehlmann | |||||||||||||||||||
| February 14, 2011 | 6,675 | 1,525 | 1,125 | 1,075 | 1,125 | |||||||||||||||||||
| April 13, 2011 | 14,192 | 6,684 | 6,076 | 5,903 | 6,076 | |||||||||||||||||||
| April 26, 2011 | 14,985 | 3,796 | 3,130 | 2,164 | 2,830 | |||||||||||||||||||
| April 30, 2011 | 6,650 | 1,800 | 1,175 | 1,125 | 1,125 | |||||||||||||||||||
| February 14, 2012 | 6,675 | 1,525 | 1,125 | 1,075 | 1,125 | |||||||||||||||||||
| April 13, 2012 | 7,096 | 3,342 | 3,038 | 2,951 | 3,038 | |||||||||||||||||||
| April 26, 2012 | 14,985 | 3,796 | 3,130 | 2,165 | 2,831 | |||||||||||||||||||
| April 13, 2013 | 7,097 | 3,342 | 3,039 | 2,952 | 3,039 | |||||||||||||||||||
| April 26, 2013 | 15,030 | 3,808 | 3,140 | 2,171 | 2,839 | |||||||||||||||||||
| Vesting Date | Davis | Stollings | Barbercheck | Langford | Lefferson | ||||||||
| February 27, 2014 | 14,552 | 1,965 | 2,065 | 2,731 | 4,695 | ||||||||
| March 6, 2014 | 8,092 | 3,039 | 2,240 | 3,039 | 5,224 |
| March 14, 2014 | 14,964 | 1,437 | 2,138 | 2,071 | 4,042 | ||||||||
| March 30, 2014 | 3,184 | 898 | 750 | 976 | 1,254 | ||||||||
| February 27, 2015 | 14,596 | 1,971 | 2,071 | 2,739 | 4,710 | ||||||||
| March 6, 2015 | 8,093 | 3,039 | 2,241 | 3,039 | 5,224 | ||||||||
| March 30, 2015 | 3,195 | 901 | 752 | 979 | 1,259 | ||||||||
| March 6, 2016 | 8,096 | 3,040 | 2,242 | 3,040 | 5,227 | ||||||||
| March 6, 2016 – Performance Based | 24,281 |
The following table shows the stock options exercised by, and restricted stock that vested for, the NEOs in 20102013 and the value realized upon exercise.
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||
| Claude E. Davis | — | $ | — | 17,650 | $ | 329,207 | ||||||||||
| C. Douglas Lefferson | 10,500 | 30,425 | 4,375 | 81,840 | ||||||||||||
| J. Franklin Hall | 5,250 | 15,212 | 3,025 | 56,440 | ||||||||||||
| Gregory A. Gehlmann | — | — | 2,950 | 54,974 | ||||||||||||
| Samuel J. Munafo | 7,875 | 22,819 | 2,950 | 55,143 | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise ( #) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
| Claude E. Davis | 425,300 | $ | 2,018,571 | 54,781 | $ | 855,270 | ||||||||||
| Anthony M. Stollings | — | — | 6,596 | 103,124 | ||||||||||||
| Richard S. Barbercheck | 74,800 | 217,267 | 8,564 | 133,980 | ||||||||||||
| Kevin T. Langford | — | — | 8,424 | 131,637 | ||||||||||||
| C. Douglas Lefferson | 13,591 | 65,645 | 17,128 | 267,479 | ||||||||||||
| J. Franklin Hall | 89,000 | 253,815 | 15,391 | 240,669 | ||||||||||||
The following table shows each pension plan that the NEO participates in, the number of years of credited service and the present value of accumulated benefits. Values reflect the actuarial assumptions used for financial reporting purposes.
| Name(3) | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | |||||||||
| Claude E. Davis | Pension Plan | 6 | $ | 99,483 | $ | 0 | |||||||
| SERP | 6 | 210,984 | $ | 0 | |||||||||
| C. Douglas Lefferson | Pension Plan | 25 | 363,602 | $ | 0 | ||||||||
| SERP | 25 | 160,862 | $ | 0 | |||||||||
| J. Franklin Hall | Pension Plan | 12 | 128,862 | $ | 0 | ||||||||
| SERP | 12 | 34,561 | $ | 0 | |||||||||
| Samuel J. Munafo | Pension Plan | 39 | 1,260,998 | $ | 0 | ||||||||
| SERP | 39 | 416,961 | $ | 0 | |||||||||
| Gregory A. Gehlmann | Pension Plan | 6 | 86,404 | $ | 0 | ||||||||
| SERP | 6 | 30,805 | $ | 0 | |||||||||
| Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||||||||
| Claude E. Davis | Pension Plan | 9 | $ | 172,115 | $ | 0 | ||||||||
| SERP | 9 | 435,858 | 0 | |||||||||||
| Anthony M. Stollings | Pension Plan | 7 | 119,866 | 0 | ||||||||||
| SERP | 7 | 30,495 | 0 | |||||||||||
| Richard S. Barbercheck | Pension Plan | 8 | 152,080 | 0 | ||||||||||
| SERP | 8 | 36,411 | 0 | |||||||||||
| Kevin T. Langford | Pension Plan | 8 | 112,866 | 0 | ||||||||||
| SERP | 8 | 36,469 | 0 | |||||||||||
| C. Douglas Lefferson | Pension Plan | 28 | 541,269 | 0 | ||||||||||
| SERP | 28 | 263,091 | 0 | |||||||||||
| J. Franklin Hall | Pension Plan | 14 | 200,007 | 0 | ||||||||||
| SERP | 14 | 0 | 97,783 | |||||||||||
| (1) | The number of years of service credited to the NEOs under the plan are computed as of December 31, |
| (2) | The present value of accumulated benefits shown in this column is calculated as of December 31, |
Pension Benefits
Defined Benefit Plan
The First Financial Bancorp EmployeesAssociate Pension Plan and Trust ("(“Pension Plan"Plan”) is a tax qualifiedtax-qualified pension plan covering eligible employees of the Company. Effective January 1, 2008 (July 1, 2007 for new participants), we made several changes to the Pension Plan to be better positioned competitively to attract and retain employees and to manage the escalating and varying costs of retiree benefits. These changes also resulted in revisions to benefits under our non-qualified retirement plans. To offset the potential reduction in retirement benefits, we made enhancements to the First Financial Bancorp Thrift Plan, a profit sharing plan with a 401(k) component ("Thrift Plan").
Benefits under the Pension Plan'sPlan’s previous traditional pension benefit formula were frozen as of December 31, 2007 (except with respect to certain employees, as explained below), and as of January 1, 2008 participants accrue benefits under a new account balance formula. The changes reflect a shift towards account balance formulas and a shift away from traditional annuity-type formulas. The material terms and conditions of the Pension Plan as they pertain to the NEOs for 20102013 are as follows:
Account Balance Formula
Eligibility
. The Pension Plan covers employees of the Company who have attained age 21 and completed one year of credited service.Benefit Formula
. The Pension Plan provides an accrual to aInterest
. Participant accounts are credited with interest for each year at the rate onVesting
. A participant becomes vested in this retirement benefit after three years of service or upon attaining the age of 65.Distribution
. AEach of our NEOs is eligible to participate in the Pension Plan with respect to the account balance formula. Messrs. Davis, Lefferson, Hall, GehlmannStollings, Barbercheck, Langford, and MunafoLefferson are fully vested in their Pension Plan retirement benefit.
Effective January 1, 2014, the composition of the Company’s overall retirement benefit changed. As a result, the Defined Benefit Plan benefit for all employees, including NEOs and other executives, was reduced from 9% to 5% of eligible earnings.
Traditional Pension Benefit Formula
Benefits accruing prior to January 1, 2008 will generally be calculated based on benefit service and average monthly compensation as of December 31, 2007. However, average monthly compensation for participants who attained age 50 and completed 10 years of service before January 1, 2008 will take into account compensation paid after December 31, 2007. Mr. Munafo accrued a benefit under the Pension Plan's traditional pension benefit formula. In addition, Mr. Munafo continues to receive compensation adjustments under the Pension Plan's traditional pension benefit formula.
Executive Supplemental Retirement Agreements
The Company maintains certain Executive Supplemental Retirement Agreementsa supplemental executive retirement plan (collectively referred to as the "SERP"“SERP”) to supplement the retirement benefits provided under the Pension Plan for certain senior executive officers of the Company in order to make up for legal limits applicable to the benefits provided under the Pension Plan. The SERP is an unfunded, unsecured pension benefit plan for a select group of highly compensated employees. The material terms and conditions of the SERP as they pertain to the NEOs for 20102013 are as follows:
Eligibility.
The SERPBenefit Formula
. The SERP provides a benefit in excess of theVesting
.Time and Form of Payment
. Payment of benefits under the SERP generally commence upon thePursuant to the Defined Benefit Plan changes effective January 1, 2014 described above, SERP benefits for all NEOs and other executives was reduced from 9% to 5% of eligible earnings.
The Company maintains a number oftwo nonqualified deferred compensation plans in which its named executives are eligible to participate. Each of our named executives is eligible to defer base salary and bonus underfor the terms ofChief Executive Officer: the First Financial Bancorp Deferred Compensation Plan ("DCP"), described more below. In addition, and the Supplemental Savings Agreement (“SSA”). The DCP was frozen in 2010 to any future employee or Company contributions. Mr. Davis is eligible for a Company contribution pursuant to the terms of his Executive Supplemental Savings Agreement ("SSA"),the SSA, described more below. No other named executive is eligible to participate in these plans. The table below shows the contributions made by and on behalf of our named executive officersthe CEO to these nonqualified deferred compensation plansthe SSA for 2010,2013 as adjusted forwell as related earnings and distributions.
| Name | Name of Plan | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contribution in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($)(3) | ||||||||||||||||
| Claude E. Davis | DCP | — | — | 34,441 | — | 154,679 | ||||||||||||||||
| SSA | — | 31,121 | 35,112 | — | 237,376 | |||||||||||||||||
| (1) | The |
| (2) | The investment earnings/loss for |
| (3) | The aggregate balance for the DCP as of December 31, |
Deferred Compensation Plan
The DCPdeferred compensation plan (“DCP”) is an unfunded, unsecured deferred compensation plan maintained for a select group of highly compensated employees of the Company.CEO only that was frozen to future employee and employer contributions in 2010. The material terms and conditions of the DCP as they pertain to the NEOsCEO for 20102013 are as follows:
Investments. Employees designated by the Company's Board of Directors are eligible to participate. Each of our NEOs is eligible to participate in the DCP. However, Mr. Davis is the only NEO who currently participates in the DCP.
Distributions
. Distribution ofExecutive Supplemental Savings Agreement
The Company has entered into an Executive Supplemental Savings Agreement ("SSA"(“SSA”) with Mr. Davis to supplement the benefits provided under the Company's Thrift Plan.First Financial Bancorp 401(k) Savings Plan (the “Savings Plan”). The SSA is an unfunded, unsecured deferred compensation plan. The SSA was amended and restated effective December 31, 2013 to state that no additional credits will be provided under the SSA after December 31, 2013. The material terms and conditions of the SSA as they pertain to Mr. Davis are as follows:
Employer Contributions
. For each calendar year, ending with the 2013 calendar year, the CompanyEarnings
. Mr.Vesting
. Mr.Distribution
. Mr.The Split DollarSplit-Dollar Agreement is an endorsement method split dollarsplit-dollar arrangement, which applies to a life insurance policy owned by the Company which, upon ana NEO’s death, first pays the Company the premiums which the Company paid for the policy, and then pays the NEO’s beneficiary a death benefit equal to three times the executive’s base salary in effect at his or her death. If the NEO terminated employment before death and, when employment terminated, he or she was eligible to receive an immediate retirement benefit under the Pension Plan (including an early retirement benefit) and had been employed for at least five years, the Company keeps the policy in force until the executive’s death and the death benefit is equal to three times the executive’s base salary at the time of his or her termination of employment. In either case, any amounts payable under the policy after the payment to the NEO’s beneficiary are paid to the Company.
Potential Change in ControlChange-in-Control Payments
The table below summarizes the potential change in controlchange-in-control benefits that would become payable to each of ourthe NEOs as of December 31, 20102013 as provided under the NEOs'NEOs’ Employment Agreements (as described in more detail in the CD&A), under the Company’s Key Management Severance Plan (for Mr. Langford only) and pursuant the NEO'sNEO’s equity award agreements ("(“Equity Agreements"Agreements”).
For these benefits, we assumed a change in control of First Financial and a termination of employment by the surviving company without cause (or a resignation of the officer for good reason). (double trigger) within one year of the change in control. We assumed that both events occurred on December 31, 2010.2013. To the extent relevant, the amounts assume a First Financial stock price of $18.48,$17.43, the closing price for our stock on that date.
For purposes of the Employment Agreements and the Equity Agreements,above mentioned agreements, a "change“change in control"control” generally means (as determined by the Board of Directors of the Company): (a) a change in the ownership of the Company by way of a merger or consolidation with another corporation and as a result of such merger or consolidation less than 75%65% of the outstanding voting securities of the surviving or resulting corporation will be owned in the aggregate by the former shareholders of the Company as the same shall have existed immediately prior to such merger or consolidationconsolidation; (b) the sale by the Company of substantially all50% or more of its assets to another corporation which is not a wholly owned subsidiary; (c) "beneficial ownership"“beneficial ownership” (within the meaning of the Securities Exchange Act of 1934) of twenty percent or more of the total voting capital stock of the Company then issued and outstanding has been acquired by any person or "group"“group” (within the meaning of the Securities Exchange Act); or (d) individuals who were members of the Board of Directors immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors do not constitute a majority of the Board of Directors immediately following such election, unless the election of such new directors was recommended to the shareholders by the management of the Company. For purposes of the determining a "change“change in control"control” under Mr. Davis' Employment Agreementthe agreements and for purposes of determining accelerated vesting of equity awards in connection with a change in control under the Equity Agreements, a change in "beneficial ownership"“beneficial ownership” as described above would not occur if such change occurred in connection with an acquisition by the Pension Plan or certain acquisitions by Company. In addition, a change in the Board of Directors of the Company is measured over a two yeartwo-year period under Mr. Davis' Employment Agreementthe employment agreements and under the Equity Agreements. Importantly, recent legislation and regulations limits our ability to pay any severance to the NEOs. Please refer to the Compensation Discussion and Analysis, above. However, SEC regulations require us to report compensation in the table below that would have been paid had the termination event occurred on the last day of our fiscal year.
In accordance with SEC regulations, we do not report any amount to be provided to ana NEO under any arrangement which does not discriminate in scope, terms or operation in favor of our executive officers and which is available generally to all salaried employees. Also, the following table does not include amounts disclosed above under the pension benefits table,Pension Benefits Table, the deferred compensation table,Nonqualified Deferred Compensation Table or the outstanding equity awardsOutstanding Equity Awards at year-endFiscal Year End table, except to the extent that the amount payable to the NEO would be enhanced by the termination event.
If we calculated these amounts using a different date, the change in the amounts could be significant. For example, other equity awards have vested during the first quarter of 2010and/or were granted since December 31, 2013 and our stock value has fluctuated. Therefore, if we had calculated the amounts shownpayable based on an April 20092014 change in control and termination, the total payment amount would differ. In addition, several of the items shown (particularly under “Cash Severance” and “Excise Tax Gross-Up”) depend on compensation received over a period of time.
As noted above, the benefits shown under “Acceleration of Unvested Equity” are received upon the change in control itself and do not require termination of employment, while the other benefits require a qualifying termination of employment. In addition, it is possible that an Excise Tax Gross-Up payment may be required if a change in control occurred even without a qualifying employment termination with respect to those benefits that become payable or vested solely upon the occurrence of a change in control.
The “Restricted Stock” amounts reflect the market value of restricted stock held by the named executive officerNEO on December 31, 2010.2013. The amounts shown under “Unexercisable Options” include the excess of the market price over the exercise price for all of the NEO’s unvested options. We computed the other amounts in accordance with the terms of the change in control employment agreements.
| Mr. Davis | Mr. Lefferson | Mr. Hall | Mr. Gehlmann | Mr. Munafo | ||||||||||||||||
Change in Control Severance Benefits | ||||||||||||||||||||
| Base Salary (2x) | $ | 1,294, 868 | $ | 637,474 | $ | 637,474 | $ | 587,671 | $ | 547,829 | ||||||||||
| Bonus for Year of Separation (2x)(1) | $ | 650,000 | $ | 256,000 | $ | 256,000 | $ | 118,000 | $ | 192,500 | ||||||||||
| Present Value Death Benefit | $ | 867,482 | $ | 152,620 | $ | 307,961 | $ | 381,092 | $ | — | ||||||||||
| General Health and Welfare Benefits/Outplacement | $ | 38,368 | $ | 27,714 | $ | 27,714 | $ | 26,464 | $ | 25,464 | ||||||||||
| Change in Control Severance Benefits | $ | 2,850,718 | $ | 1,073,808 | $ | 1,229,149 | $ | 1,113,227 | $ | 765,793 | ||||||||||
| Acceleration of Unvested Equity | ||||||||||||||||||||
| Restricted Stock | $ | 573,514 | $ | 157,700 | $ | 121,056 | $ | 117,437 | $ | 109,729 | ||||||||||
| Unexercised Options | $ | 81,742 | $ | 18,682 | $ | 13,703 | $ | 13,718 | $ | 13,305 | ||||||||||
| Total Unvested Equity | $ | 655,256 | $ | 176,382 | $ | 134,759 | $ | 131,155 | $ | 123,034 | ||||||||||
| Total Compensation Under Agreements | $ | 3,505,974 | $ | 1,250,190 | $ | 1,363,907 | $ | 1,244,382 | $ | 888,827 | ||||||||||
| Excise Tax Gross-Up | $ | 1, 413,098 | $ | -0- | $ | 546,893 | $ | 509,156 | $ | -0- | ||||||||||
| Total Benefits (2) | $ | 4,919,072 | $ | 1,250,190 | $ | 1,910,800 | $ | 1,753,538 | $ | 888,827 | ||||||||||
| Mr. Davis | Mr. Stollings | Mr. Barbercheck | Mr. Langford | Mr. Lefferson | ||||||||||||||||
| Change-in-Control Severance Benefits | ||||||||||||||||||||
| Base Salary (1) | $ | 1,380,000 | $ | 640,000 | $ | 525,402 | $ | TBD | $ | TBD | ||||||||||
| Bonus for Year of Separation (2x)(2) | $ | 739,072 | $ | 256,000 | $ | 157,621 | $ | TBD | $ | TBD | ||||||||||
| General Health and Welfare Benefits/Outplacement | $ | 52,653 | $ | 34,153 | $ | 29,555 | $ | TBD | $ | TBD | ||||||||||
| Change-in-Control Severance Benefits | $ | 2,171,725 | 930,153 | 712,578 | TBD | TBD | ||||||||||||||
| Acceleration of Unvested Equity | ||||||||||||||||||||
| Restricted Stock | $ | 1,726,494 | $ | 283,935 | $ | 252,718 | $ | TBD | $ | TBD | ||||||||||
Accrued Dividends on Unvested Restricted Stock | $ | 146,991 | $ | 21,613 | $ | 21,868 | $ | TBD | $ | TBD | ||||||||||
| Unvested Options | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Total Unvested Equity | $ | 1,873,485 | $ | 305,548 | $ | TBD | $ | TBD | $ | TBD | ||||||||||
| Total Compensation Under Agreements | $ | 4,045,210 | $ | 1,235,701 | $ | TBD | $ | TBD | $ | TBD | ||||||||||
| Cutback to avoid 280G Excise tax (if applicable) | $ | - | $ | 41,782 | $ | TBD | $ | - | $ | - | ||||||||||
| Total Benefits (3) | $ | 4,045,210 | $ | 1,193,919 | $ | TBD | $ | TBD | $ | TBD | ||||||||||
| (1) |
(2) (3) | For Mr. Davis equal to the lesser of (x) two and one-half times the Target Bonus Amount or (y) two times the three-year average of the actual annual bonus awards paid (or payable) to the employee by the Company for the three (3) completed calendar years that immediately precede the employee’s termination of employment, payable in equal bi-weekly installments over the Severance Period, commencing with the first payroll period following the sixtieth (60th) day after employee’s date of termination of employment (the Termination Compensation and Termination Short-Term Bonus, collectively, the “Severance Benefits”) These are the amounts assigned to these benefits for purposes of IRC Section 280G calculations. They do not necessarily reflect the actual cash payments to be paid to the applicable |
Payments for Termination Without Regard to a Change in Control
The table below summarizes the potential benefits payable to each of the NEO'sNEO’s under their Employment Agreementsemployment agreements or severance and change in control agreements, as applicable, upon an involuntary termination of the NEO's employment by the Company without cause or upon the NEOsNEO’s resignation for "good reason"“good reason” without regard to the occurrence of a change in control of the Company.
As further described in the CD&A, generally, Messrs. Davis and Gehlmann area NEO is entitled to certain payments in the event that there is a significant reduction in theirhis base salary or theirhis responsibilities as set out in their respective employment agreements. This is known as termination for “good reason.” With respect to Messrs, Lefferson, Hall, and Munafo, they can terminate their agreement for "good reason" if there is a change in their duties, they are transferred to a new position that is not comparable to their current position, responsibilities or status; substantial alteration in the nature or status of their responsibilities; reduction in their base salaries; First Financial refuses to renew the applicable employment agreement for any reason (other than cause); or changes in their employment benefits. Further, Messrs. Davis and Gehlmann are entitled to the payments below if First Financial does not renew their agreements (other than for cause).
| Mr. Davis | Mr. Lefferson | Mr. Hall | Mr. Gehlmann | Mr. Munafo | ||||||||||||||||
| Termination for Good Reason Severance Benefits | ||||||||||||||||||||
| Base Salary (2x) | $ | 1,300,000 | $ | 640,000 | $ | 640,000 | $ | 590,000 | $ | 550,000 | ||||||||||
| Bonus for Year of Separation (2x)(1) | $ | 650,000 | $ | 256,000 | $ | 256,000 | $ | 118,000 | $ | 192,500 | ||||||||||
| General Health and Welfare Benefits/Outplacement | $ | 38,368 | $ | 27,714 | $ | 27,714 | $ | 26,464 | $ | 25,464 | ||||||||||
| Total Benefits | $ | 1,988,368 | $ | 923,714 | $ | 923,714 | $ | 734,464 | $ | 767,964 | ||||||||||
| Mr. Davis | Mr. Stollings | Mr. Barbercheck | Mr. Langford | Mr. Lefferson | ||||||||||||||||
| Termination for Good Reason Severance Benefits | ||||||||||||||||||||
| Base Salary (2x) | $ | 1,380,000 | $ | 640,000 | $ | 525,402 | $ | TBD | $ | TBD | ||||||||||
| Bonus for Year of Separation (2x)(1) | $ | 739,072 | $ | 256,000 | $ | 157,621 | $ | TBD | $ | TBD | ||||||||||
| General Health and Welfare Benefits/Outplacement | $ | 52,653 | $ | 34,153 | $ | 29,555 | $ | TBD | $ | TBD | ||||||||||
| Total Benefits | $ | 2,171,725 | $ | 930,153 | $ | 712,578 | $ | TBD | $ | TBD | ||||||||||
| (1) |
Payments for Voluntary Termination by NEO, Termination for Cause
In the event of ana NEO’s voluntary termination of the agreement (other than as specifically set forth in the agreement) or termination for cause, the NEO is not entitled to any special benefits under their respective employment agreements or any stock awards. All such benefits are void.
Payments Upon Death or Disability
There are no additional benefits or payments due to disability of a NEO, other than under the existing disability policies of the Company that apply to all employees. There currently is no acceleration of restricted stock or options.
Upon the death of ana NEO, the NEOsNEO’s estate would be entitled to three (3) times the NEOsNEO’s base salary at the time of death pursuant to the split dollarsplit-dollar life insurance policies previously discussed. See “ – Split Dollar“- Split-Dollar Life Insurance.”
There is currently is no acceleration of restricted stock or options. The Replacement Agreements do not provide for any additional benefits tooptions in the NEOs upon death.
Retirement Benefits
In the event of retirement by the Named Executives,NEOs, they would be entitled to certain retirement benefits that can be paid over time or taken in a lump sum. Below is a presentation regarding lump sum benefits for early retirement under the pension plan:
| Total Present Value | Total Present Value | Incremental Value due | Incremental | |||||||||||||
| of Accumulated | Vested Accumulated | to Difference between | Value due | |||||||||||||
| Named Executive | Benefit using FAS87 | Benefit using Actual | FAS87 Assumptions and | due to Early | ||||||||||||
| Officers | Assumptions (1) | Lump Sum Basis (2) | Actual Lump Sum Basis(3) | Ret. Subsidies(3) | ||||||||||||
| Claude Davis | $ | 310,467 | $ | 357,259 | $ | 46,792 | $ | — | ||||||||
| C. Douglas Lefferson | 524,464 | 515,561 | (14,913 | ) | 6,010 | |||||||||||
| J. Franklin Hall | 163,423 | 194,006 | 23,377 | 7,206 | ||||||||||||
| Gregory A. Gehlmann | 117,209 | 138,216 | 21,007 | — | ||||||||||||
| Samuel J. Munafo | 1,677,959 | 1,941,883 | (40,053 | ) | 303,977 | |||||||||||
| Incremental | ||||||||||||||||
| Total Present | Value due | |||||||||||||||
| Total Present | Value of | to Difference | ||||||||||||||
| Value of | Vested | between | ||||||||||||||
| Accumulated | Accumulated | ASC Topic 715 | Incremental | |||||||||||||
| Benefit using | Benefit using | Assumptions | Value due to | |||||||||||||
| ASC Topic 715 | Actual | And Actual | Early | |||||||||||||
| Assumptions | Lump Sum | Lump Sum | Retirement | |||||||||||||
| Named Executive Officers | (1) | Basis (2) | Basis (3) | Subsidies (3) | ||||||||||||
| Claude E. Davis | $ | 607,973 | $ | 721,277 | $ | 113,304 | $ | — | ||||||||
| Anthony M. Stollings | $ | 150,361 | $ | 168,552 | $ | 18,191 | $ | |||||||||
| Richard Barbercheck | 188,491 | 218,259 | 29,768 | |||||||||||||
| Kevin T. Langford | $ | 149,335 | $ | 215,147 | $ | 65,812 | $ | — | ||||||||
| C. Douglas Lefferson | $ | 804,360 | $ | 858,711 | $ | 54,351 | $ | — | ||||||||
| (1) | See “Pension |
| (2) | Calculated assuming NEO terminates employment on December 31, |
| (3) | For information purposes only. Allocates the increase in retirement value over the values shown in the Pension Benefit Table to its two primary sources: |
| (ii)Value of early retirement subsidies that are included in the actual lump sum payment if the NEO terminates employment |
Other than as set forth above, NEOs are not entitled to any additional benefits. For example, there currently is no acceleration of restricted stock or options upon retirement.
| Fees by Category | 2010 | 2009 | ||||||
| Audit Fees | $ | 1,357,625 | $ | 2,128,570 | ||||
| Audit-Related Fees (1) | 57,000 | 55,000 | ||||||
| Tax Fees | — | — | ||||||
| All Other Fees (2)(3) | 215,840 | 60,800 | ||||||
Total | $ | 1,630,465 | $ | 2,244,370 | ||||
During 2010,2013, no member of the Compensation Committee was an employee, officer or former officer of the Company. None of our executive officers served in 20102013 on the board of directorsBoard or compensation committeeCompensation Committee (or other committee serving an equivalent function) of any entity that had an executive officer serving as a member of our Board or the Compensation Committee. All Compensation Committee members had banking or financial services transactions in the ordinary course of business with our banking andbank subsidiary. No other relationships required to be reported under the rules promulgated by the Securities and Exchange CommissionSEC exist with respect to members of the Company’s Compensation Committee.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, directors and persons who own more than 10 percent of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and greater than 10 percent shareholders are required by SEC regulations to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company’s review of the copies of such forms that it has received and written representations from certain reporting persons that they were not required to file a Form 5 for the specified fiscal year, except as set forth below, the Company believes that all of its officers, directors and greater than 10 percent shareholders complied with all filing requirements applicable to them with respect to transactions during fiscal 2010.
If an eligible shareholder wishes to present a proposal to be included in the Company’s Proxy Statementproxy statement and form of Proxyproxy relating to the 20112015 Annual Meeting of Shareholders, it must be presented to management by certified mail, written receipt requested, not later than December 16, 2011.__, 2014. Any such proposal must comply with Rule 14a-8 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Any shareholder who intends to propose any other matter to be acted upon at the 2011 Annual Meeting of Shareholders must inform the Company no later than February 24, 2011. If notice is not provided by that date, the person(s) named in the Company’s Proxy for the 2011 Annual Meeting will be allowed to exercise his or her discretionary authority to vote upon any such proposal without the matter having been discussed in the Proxy Statement for the 2011 Annual Meeting. The Company must provide him/her with a copy of its opposition statements no later than 30 calendar days before it files definitive copies of its proxy statement and form of proxy under Rule 14a-6. Any shareholder who intends to propose any other matter to be acted upon at the current Annual Meeting of Shareholders had to inform the Company no later than February 2, 2014. If notice is not provided by that date, the person(s) named in the Company’s proxy for the 2014 Annual Meeting will be allowed to exercise his or her discretionary authority to vote upon any such proposal without the matter having been discussed in the proxy statement for the 2014 Annual Meeting. Proposals should be sent to First Financial Bancorp.,Bancorp, Attention: Gregory A. Gehlmann, General Counsel &Anthony M. Stollings, Chief Financial Officer and Secretary, 201255 E. FourthFifth Street, Suite 2000,700, Cincinnati, Ohio 45202.
SEC rules allow a single copy was delivered. If such shareholder wishesof the proxy materials or the notice of internet availability of proxy materials to be delivered to multiple shareholders sharing the same address and last name, or who we reasonably believe are members of the same family and who consent to receive a separatesingle copy of these materials in a manner provided by these rules. This practice is referred to as “householding” and can result in significant savings of paper and mailing costs.
Because we are using the SEC’s notice and access rule for shareholders holding less than 1,000 shares, we will not household our proxy materials or notices to shareholders of record sharing an address. This means that shareholders of record who share an address will each be mailed a separate notice or paper copy of the proxy materials. However, we understand that certain brokerage firms, banks, or other similar entities holding our common shares for their customers may household proxy materials or notices. Shareholders sharing an address whose shares are held by such documents,an entity should contact Gregory A. Gehlmann,such entity if they now receive (1) multiple copies of our proxy materials or notices and wish to receive only one copy of these materials per household in the future, or (2) a single copy of our proxy materials or notice and wish to receive separate copies of these materials in the future. Additional copies of our proxy materials are available upon request by contacting: Kenneth Lovik, Investor Relations & Corporate SecretaryDevelopment, at, 201255 E. FourthFifth Street, Suite 2000,2900, Cincinnati, OH 45202 (or by phone at 513-979-5837)877-322-9530) by May 10, 201113, 2014 to ensure timely delivery.
If you own First Financial Bancorp stock beneficially through a bank or broker, you may already be subject to householding if you meet the criteria. If you wish to receive a separate Proxy Statementproxy statement and Annual Report in future mailings, you should contact your bank or broker.
The Company’s financial statements are not included in this Proxy Statementproxy statement as they are not deemed material to the exercise of prudent judgment by the shareholders with respect to any proposal to be submitted at the Annual Meeting. The Company’s Annual Report for the year ended December 31, 2010,2013, is being made available electronically or being mailed to shareholders with the Proxyproxy and Proxy Statement in accordance with the Company’s house-holding program,proxy statement, but such Annual Report is not incorporated in this Proxy Statementproxy statement and is not deemed to be a part of the Proxyproxy soliciting material.
A shareholder of the Company may obtain a copy of the Annual Report on Form 10-K, including financial statements and schedules thereto, for the fiscal year ended December 31, 2010,2013, and as filed with the SEC, without charge by submitting a written request to the following address:
First Financial Bancorp.
Attn: Kenneth Lovik
Investor Relations & Secretary
255 E. FourthFifth Street, Suite 2000
Cincinnati, Ohio 45202
The Annual Report on Form 10-K is also available within the Investor Relations section of our website atwww.bankatfirst.com/Investorinvestor under the “Annual Reports” link or by going to the SEC’s website atwww.sec.gov.
Management and the Board of Directors of the Company know of no business to be brought before the meeting other than as set forth in this Proxy Statement.proxy statement. However, if any matters other than those referred to in this Proxy Statementproxy statement should properly come before the meeting, it is the intention of the persons named in the enclosed Proxyproxy to vote such Proxyproxy on such matters in accordance with their best judgment.
The expense of proxy solicitation will be borne by us. Proxies will be solicited by mail and may be solicited for no additional compensation by some of the officers, directors and employees of the Company or its subsidiaries by telephone or in person. Brokerage houses and other custodians, nominees and fiduciaries may be requested to forward soliciting material to the beneficial owners of shares of the Company and will be reimbursed for their related expenses.
By Order of the Board of Directors, | |
| Anthony M. Stollings | |
| Secretary |
April __, 2011
PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION OF
FIRST FINANCIAL BANCORP.
FOURTH. (A) The maximum number of Incorporation
(B) The total number of common shares which the corporation is authorized to issue is One Hundred Sixty Million (160,000,000) common shares, without par value.
(1) Dividends. The holders of common shares shall be entitled to receive dividends, if and when declared payable from time to time by its Code of Regulations. The number of directors may be increased or decreased as therein provided but the number thereof shall in no event be fixed at less than nine. The Board of Directors, shall be divided into three classes as nearly equal in number as the then total number of directors constituting the whole board permits, with the term of office of one class expiring each year. At the first annual meeting of stockholders, directors of Class I shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of Class II shall be elected to hold office of a term expiring at the second succeeding annual meeting, directors of Class III shall be elected to hold office for a term expiring at the third succeeding annual meeting. In no event shall there be less than three directors per class. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose terms shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. In the event offrom any increase in the number of directors of the corporation, the additional directors shall be so classified that all classes of directors shall be increased equally as nearly as may be possible. In the event of any decrease in the number of directors of the corporation, all classes of directors shall be decreased as equally as possible. At the annual meeting of shareholders in 2011 and at each annual meeting of shareholders thereafter, the successors to that class of directors whose term then expires shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until a successor is elected, or until the director’s earlier resignation, removal from office, or death. Directors elected at the 2009 and 2010 annual meetings of shareholders shall hold office until, respectively, the 2012 and 2013 annual meeting of shareholders and until a successor is elected, or until the director’s earlier resignation, removal from office, or death. Any director elected to fill a vacancy in the board of directors that results from an increase in the number of directorsfunds legally available therefore.
(2) Voting. Each outstanding common share of the corporation shall be electedentitle the holder thereof to hold office for a term expiring atone vote and, except as otherwise prescribed by law or the next annual meetingprovisions of shareholders and until a successor is elected, or untilthis Article Fourth, the director’s earlier resignation, removal from office, or death. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall hold office for the remaining term of his or her predecessor.
(3) Preemptive Rights. No holder of its respective responsibilities under, the Plan. The Committee may at any time amend, modify, suspend, or terminate such rules, regulations, policies, or practices.
(4) Purchase of Own Securities. The corporation shall be subjectauthorized to restrictions as may be determined by the Committee. Incentive Award amounts earned but not yet paid will not accrue interest. Incentive Awards, including any grant of Shares in lieu of cash, shall be paidpurchase or issued by March 15 of the calendar year following the year in which the Performance Period closes (or such later date as permitted by applicable tax rules), after the determination of the amount thereof by the Committee.
(5) The shareholders shall not have the right to vote cumulatively in the election of laws.
(C) The total number of preferred shares which the corporation shall have the authority to issue is the Company’s intent that the Plan compliesTen Million (10,000,000) preferred shares, with or be exempt from the requirements of Section 409A and that the Plan be administered and interpreted accordingly. If and to the extent that any payment or benefit under the Plan is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to a Participant by reason of the Participant’s termination of employment, then (a) such payment or benefit shall be made or provided to the Participant only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if the Participant is a “specified employee” (within the meaning of Section 409A andwithout par value as determined by the Company), such paymentBoard of Directors. The Board of Directors is hereby authorized, subject to the limitations prescribed by law or benefitthe provisions of this Article Fourth, by filing articles of amendment pursuant to the applicable laws of Ohio, to provide for the issuance of preferred shares and to fix the designations, powers, preferences and rights thereof Subject to the limitations set forth herein, the Board of Directors has the authority to determine and fix any express terms with respect to each series to the fullest extent permitted by the Revised Code of Ohio or the provisions of this Article Fourth, which shall include, but not be made or provided onlimited to, the date that is six months and one day after the datedetermination of the Participant’s separation from service (or earlier death). Any amount not paid in respect of the six month period specified in the preceding sentence will be paid to the Participant (plus interest at the applicable federal rate as defined in Section 1274(d) of the Code) in a lump sum on the date that is six months and one day after the Participant’s separation from service (or earlier death). Each payment made under the Plan shall be deemed to be a separate payment for purposes of Section 409A.
| the number of shares constituting that series and the distinct designation of that series; |
| the dividend rate, if any, on such shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends or other distributions on shares of that series; |
| whether that series shall have voting rights in addition to the voting rights provided by law, and, if so, the terms of such voting rights, provided that the holders of preferred shares will not be entitled (a) to more than one vote per share, when voting as a class with the holders of common shares or (b) to vote on any other matter separately as a class or series, except where expressly required by the Ohio Revised Code; |
| (4) | whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for the adjustment of the conversion rate in such events as the Board of Directors shall determine; |
| (5) | whether the shares of that series shall be redeemable or exchangeable, and, if so, the terms and conditions of such redemption or exchange, including the date or dates upon or after which they shall be redeemable or exchangeable, and the amount per share payable in case of redemption or exchange, which amount may vary under different conditions and at different redemption or exchange rates; |
| (6) | whether that series shall have a sinking fund for redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; |
| (7) | the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; and |
| (8) | any other relative rights, preferences and limitations of that series. |
ANNUAL MEETING OF SHAREHOLDERS
May 24, 2011
THIS PROXY IS SOLICIATEDSOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
John M. KuhlGavigan and Amy H. ParsonsBillie L. Meents, or either of them, each with full power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of StockholdersShareholders of First Financial Bancorp. (the “Corporation”“Company”) to be held at 201 E, Fourththe Company’s headquarters, First Financial Center, 255 E. Fifth Street, 209th Floor, Room 950, Cincinnati, Ohio 45202 on Tuesday, May 24, 201127, 2014 at 10:00 a.m., local time, or at any postponement or adjournment thereof:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and may be revoked prior to its exercise. Receipt of the accompanying proxy statement is hereby acknowledged.
Shares represented by this proxy will be voted by the stockholder.shareholder. If no such directions are indicated, the Proxiesproxies will have authority to vote FOR“FOR” the election of directors; FORand “FOR” Proposals Two,One, Three, Four Five and Six; and TRIENNIAL on Proposal Seven.
In their discretion, the Proxiesproxies are authorized to vote upon such other business as may properly come before the meeting.
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KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND DETATCH HERE
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends that you voteFOR the following:
| For | Against | Abstain | ||||
| ¨ | ¨ | |||||
| ¨ | ||||||
2. Election of Directors
| Nominees | 01 | J. Wickliffe Ach | 05 | Claude E. Davis | 09 | William J. Kramer |
| 02 | David S. Barker | 06 | Corinne R. Finnerty | 10 | Richard E. Olszewski | |
| 03 | Cynthia O. Booth
| 07 | Murph Knapke | 11 | Maribeth S. Rahe | |
| 04 | Mark A. Collar | 08 | Susan L. Knust |
For All | Withhold All | For All Except | |||
| ¨ | ¨ | ¨ |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
The Board of Directors recommends you vote FOR proposals 3, 4 and 5.
| For | Against | Abstain | |||||||||||
| 3. | Ratification of | ¨ | ¨ | ¨ | |||||||||
| 4. | Advisory (non-binding) vote on the | ¨ | ¨ | ¨ | |||||||||
| 5. | Adjournment of | ¨ | ¨ | ¨ | |||||||||
VOTE BY INTERNET:www.proxyvote.com.Use the website and follow the instructions to obtain your records and to create an electronic voting instruction form. |
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and Annual Reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | |
VOTE BY PHONE: 1-800-690-6903 | |
Use any touch-tone telephone to | |
VOTE BY MAIL Mark, sign and date your proxy card and return it in the |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report & proxy statement are available at www.proxyvote.com.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
| Date | Date | |||
| Signature (Joint Owners) | ||||
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